The nation's parliament earlier this year passed a constitutional amendment to rename the country, and had planned to hold a referendum.
But President David Adeang said that decision had changed as "Naoero is not a new name seeking acceptance by the people".
"While a referendum is intended to determine the will of the people, the name Naoero has never been lost, but rather waiting to be fully embraced," a government statement said.
Lowy Institute Pacific Islands Program Research Associate Sarah Thompson said it was an exciting and welcome change.
"National identity has so much to do with not only shared language and history and symbols and collective memory, but it's how people imagine themselves," she told AAP.
"It's a huge move for reaffirming their independence as a nation, their collective identity, who they identify as, and making sure that their indigenous language and culture is represented in their name.
"So very significant in terms of their history."
The country's native name was changed by European powers as the original pronunciation was difficult for them.
Naoero joins a group of countries that have renamed their homelands, particularly following a history of colonisation.
Regionally, Tuvalu and Kiribati both dumped their old colonial names Ellice Islands and Gilbert Islands.
Naoero is one of the world's smallest nations, with a population of about 12,000.
It was initially colonised by Germany and later administered by Australia before becoming an independent republic in 1968.
Ms Thompson said it was appropriate that the Australian government had already adopted Naoero as the official title of the nation.
"You would expect that in ongoing dialogues and communications and any further documents or treaties that Naoero would also be the title that follows," she said.
"It's seemingly very clear that Australia has welcomed the title change, even if it hasn't made an open statement."
With wires
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