East Timor has inaugurated its first ever national park in a move to protect and preserve 123,000 hectares of land and sea on the eastern tip of the island.

Both the government and the communities living in the park hope the park will lead to increased income generation and open up the door to tourism possibilities.

East Timorese Prime Minister Xanana Gusmao opened the park, which is named after his former comrade Nino Konis Santana, who was born in the park's mountains and fought for most of his life for East Timor to gain independence from Indonesia.

"[I am] very happy because we start something that it is an important process of preservation of our forest," he said.

Unlike most national parks, the new East Timor park is home to 10,000 residents, who will sign contracts to establish them as community guardians.

Mr Gusmao says the challenge is for the government to help the communities find sustainable ways to improve the quality of the environment, but also maintain their livelihoods through farming and tourism activities.

"We believe that our tourism industry should be different from Bali, we cannot compete and we don't want to compete from other places," he said.

"We will explore the difference and our capability in terms of what we have, not only preserving for the foreign eyes but also for our country, for future generations."

Colin Trainor, a conservation biologist from Charles Darwin University in Australia, says the park is the largest remnant of tropical forest on Timor island and is home to dozens of significant animals, including birds, bats and marine life.

"It has the best population on the island for many of the endemic and globally restricted range, and also threatened birds," he said.