Researchers studied the animals, one of the world's most endangered species of dolphin, for 21 years.
Their results show that the survival rate of the dolphins has increased by 5.4% since the Marine Protection Area (MPA) was declared.
The findings are published in the Journal of Applied Ecology.
"This is the first evidence that Marine Protected Areas can be effective for marine mammals. We found a significant improvement in the survival rate," said Dr Liz Slooten from the University of Otago who undertook the research.
In 1988 the Banks Peninsula Marine Mammal Sanctuary was established in the hope that resident dolphins would be protected from fatalities associated with the gillnet and trawling activities of the fishing industry.
A team of ecologists conducted regular photo identification of the dolphins for 21 years, starting two years before the area was officially protected.
"We can identify individual dolphins from their battle scars - which range from small nicks out of the dorsal fin to major scarring following shark attacks," explained Dr Slooten.
The researchers used the photographs to create a population model; with this they were able to analyse how the animals had fared over two decades.
"Estimating population changes in marine mammals is challenging, often requiring many years of research to produce data accurate enough to detect these kinds of biological changes," said Dr Slooten.
"It seems to take a long time for a dolphin population to respond to protection, and therefore a long-term study to detect [any] improvement."
'Not safe yet'
The teams models suggested that the dolphins' survival rate had increased by 5.4% - a positive result but not what the team had expected.
"At first, we were surprised that the survival rates had not increased further," said Dr Slooten, "Once the Banks Peninsula area was protected, we had expected the problem to be solved and the population to be healthy and recovering."
The team found that the dolphins did not spend the whole year in the protected area, which reached four nautical miles offshore.
In the winter, more than half the dolphins were found up to 16 nautical miles outside of the MPA.
"The dolphins don't care how far offshore they are, their distribution relates to water depth," Dr Slooten explained.
The New Zealand government is now considering whether to extend MPAs where Hector's dolphins are found.
"The good news is that the situation has improved. The population was doing a nose-dive, declining at 6% per year, and now it's only declining slowly [at] about 1% per year," said Dr Slooten.
"The bad news is that the protected area is still too small. It would need to be extended further offshore to allow the population to stop declining and better still to grow and recover towards its original population size."
"The MPA hasn't quite yet 'saved' the dolphins but it's been a major step in the right direction."