MacKillop founded the Congregation of the Sisters of St. Joseph, an order that built dozens of schools for impoverished children across the Australian Outback in the 1800s, as well as orphanages and clinics for the needy.
With vows of abstinence from owning personal belongings and dedication to helping the poor, MacKillop is credited with spreading Roman Catholicism in Australia and New Zealand.
But she was a strong-willed advocate who sometimes got into trouble for challenging orthodox thinking within the male-dominated church. In 1869 she was excommunicated for inciting her followers to disobedience, though the bishop who punished her recanted three years later and she was exonerated by a church commission.
"This is a great, great tribute to the Catholic church and a great, great tribute to her hard work in education," Australia's Prime Minister Kevin Rudd said Friday. "This is a great honor for Australia. I offer a heartfelt expression of appreciation to the wider Catholic community."
MacKillop died in 1909 and was beatified by Pope John Paul II in 1995.
Sainthood was also approved for Stanislaw Soltys, a 15th-century Polish priest; Italian nuns Giulia Salzano and Battista Varano; Spanish nun Candida Maria de Jesus Cipitria y Barriola and a Canadian brother, Andre Bessette.
Bessette, who died in 1937, was a highly popular figure among French Canadians and was known for miraculous cures.
Australians have been awaiting Friday's announcement since Benedict in December cleared the way by declaring MacKillop was responsible for the required second miracle, one of the final steps in the complex process before sainthood can be bestowed.
"It's more than just Catholics, the whole country has a new hero -- someone that will give them hope for the future," said Garry McLean, CEO of the Mary MacKillop Heritage Center in Melbourne.
"Today it has been recognized that a woman can become a saint in the Australian environment with all its complexities and challenges," Postulator for the Cause of Mary MacKillop, Sister Maria Casey, said in a statement. "Mary MacKillop is to be listed among the saints of the Catholic Church. I look forward to the celebration of her goodness when many pilgrims from all over the world come to Rome for the ceremony."