The University of Otago trial, involving 95 babies, found a course of the new vaccine produced a strong immune response in more than 90% of babies.
This was a major breakthrough because Rotavirus, as the most common cause of severe diarrhoea among infants and young children, kills more than 500,000 children aged under 5 every year, mainly in developing countries.
As part of the trial, which was a collaboration with the Murdoch Childrens Research Institute at the University of Melbourne, babies received three doses of the vaccine, with the first dose given soon after birth.
Otago University senior clinical lecturer in women and children's health, Dr Pam Jackson, said it was ''pretty cool'' being involved in research that could save so many lives.
Developed in Melbourne, the oral vaccine was tested in Dunedin because one of the Melbourne researchers was an Otago graduate and, by the time it was ready for testing, another vaccine had been rolled out in Australia, Dr Jackson said.
The new vaccine had significant benefits over the present one, as it could be given to newborns.
This not only gave ''early protection'' but also meant it would be easier to implement in poorer countries.
''In Third World countries, often ... people don't have any contact with medical professional or healthcare professionals, but they might at the time of delivery of the baby.''
The fact it was developed by university researchers would also make it ''much'' cheaper than if it had been developed by a pharmaceutical company.
She wanted to thank families for their participation, and the Health Research Council of New Zealand, which funded the study.
''Without their willingness to help, this would have been difficult to assess, and we are delighted that this vaccine has been shown to be an effective way to prevent this disease.''
Lead researcher Prof Julie Bines, of Melbourne, said the results provided confidence the vaccine would be effective.
''Not only have we shown that this novel vaccine is well tolerated in newborns, but it produces a strong immune response in a newborn, suggestive of promoting early protection from severe gastroenteritis,'' she said.
The results will be presented at the 11th International Rotavirus Symposium under way in New Delhi, India.
Clinical trials had also begun in Indonesia and it was hoped the vaccine would be available for widespread use in 2016.
In New Zealand, Rotavirus is responsible for 1500 hospital admissions of children under 5 each year.
