The Asian market is New Zealand's sixth-largest export destination for goods and services and eighth-largest import source, with a total two-way trade of NZ$4 billion (US$3.2 billion) in the year ending June 2014.
"The FTA will put New Zealand exporters back on a level playing field with competitors from Korea's other FTA partners, such as the United States, Chile and the European Union," Key said in a release.
"At the moment our exporters to Korea pay $229 million [US$181 million] a year in duties. Under the FTA, New Zealand exporters will save an estimated $65 million [US$51 million] in duties in the first year alone.
"In July 2013 when President Park and I met at the Korea-New Zealand Summit, we committed to concluding the FTA. It is very pleasing that this has now been achieved."
The Prime Minister added the two countries had a long history of working together, and the FTA would enhance their 'already strong relationship'.
Now that the negotiations have been concluded, the FTA will next go through a legal verification and translation process before it can be signed.
The agreement is expected to be ratified in 2015.
Other Asian countries with whom New Zealand has signed an FTA include China and Malaysia.