Gagai heads into Sunday's Grand Final after helping Newcastle beat Penrith last week.
The International Rugby League approved his Tier 1 switch to New Zealand on Saturday, ahead of the World Cup.
Eligibility changes in 2026 allowed the move; Gagai last played for Australia in October 2018, eight years ago.
"Dane hasn't played for Australia for eight years and we didn't want him to be disadvantaged compared to other players with recent rule changes," IRL chair Troy Grant said.
Grant said Gagai requested the change, supported by Peter V'landys and Kevin Walters, despite Walters leaving him out of Australia's 40-man World Cup squad.
Grant cited Gagai's inability to combine State of Origin with representing his heritage as an exceptional circumstance. New Zealand can now select him, but the choice is theirs.
In strong form, Gagai could join teammate Kalyn Ponga in the Kiwis backline. Ponga's rule change allows him to represent New Zealand and play State of Origin.