The department hailed the sighting as tangible proof of the success of 105km of trap lines in the Dart and Caples catchments.
Rangers had received regular reports of a pair in the Rock Burn, but this is the first time a successful breeding had been confirmed.
Doc Wakatipu bio-assets manager Barry Lawrence said staff were excited about the prospect of whio breeding in the basin for the first time since the 1980s.
"Since 1990 several of our higher catchments, where once there were whio, have progressively had trap lines established and regularly managed.
"This is part of the nation-wide Operation Ark programme, where mohua/yellowhead, whio and bats are actively managed to prevent their extinction.
The primary protection whio require is from stoats, and trap lines keep the stoat population down to less than 20% of their normal level."
Research in the Clinton and Arthur Valleys in Fiordland revealed that a 20% predation rate was sufficient for regular successful nest fledging.
Mr Lawrence said Doc's goal in this area was to support a viable population of about 30 breeding pairs.
Whio are a torrent duck, endemic to New Zealand.
They feed in fast-flowing alpine streams with bills adapted for feeding on aquatic insects that are often found beneath rocks.
Other recent whio sightings have been made at the Beans Burn, Fraser Creek, lower Kay Creek and the Route Burn.
Doc staff check the trap lines in those catchments and the Dart River, monthly in summer and three-monthly in winter.
Early next year, volunteers will assist the department in observing and recording whio in both the Rock Burn and Fraser Creek.
The Southern Lakes branch of the New Zealand Deerstalkers Association is in the advanced planning stages of establishing and managing stoat control trap lines in the Steele Creek catchment.
