The cluster of islands and shoals in Southwest Papua Province sits in the Coral Triangle and is thought to be one of the world's most pristine reefs, with its clear blue waters making it a popular diving spot.
Indonesia has the world's largest nickel reserves and is the biggest producer of the metal, which is used in electric vehicle batteries and stainless steel, and a 2020 export ban has spurred a domestic industrial boom.
Last week, Greenpeace Indonesia published videos showing environmental damage to three islands because of nickel mining projects, including one clip which racked up more than 15 million Instagram views.
President Prabowo Subianto "decided that the government will revoke the mining business licence of four companies in Raja Ampat", state secretariat minister Prasetyo Hadi told reporters.
Energy and mineral resources minister Bahlil Lahadalia said "they have violated" regulations.
"We believe this region must be protected," he said.
Greenpeace said nickel exploitation on the islands of Gag, Kawe and Manuran had led to the destruction of more than 500 hectares (1,200 acres) of forest and vegetation.
Environmentalists say coral reefs and marine life are threatened by the operations, but Bahlil denied the surrounding environment had been harmed.
"If people say the coral reefs and the ocean have been damaged, you can see for yourself. Please be careful to differentiate which one is real and which one is not," he said.
- 'Make sure they stop' -
The NGO's campaign led to growing calls by politicians and celebrities for the licences to be withdrawn.
The four companies impacted by the immediate ban are PT Anugerah Surya Pratama, PT Nurham, PT Kawei Sejahtera Mining and PT Mulia Raymond Perkasa.
PT Nurham received its mining permits this year and has not started production but the other three have had them since 2013, according to the energy ministry.
One more company -- PT Gag Nikel -- will continue to operate on Raja Ampat's Gag island but be closely monitored, said Bahlil. It received its operational permit in 2017.
The three affected islands are categorised as small islands that under Indonesian law should be off-limits to mining, Greenpeace said.
Greenpeace Indonesia said the decision was a good start but the government needed to take further action.
"We appreciate this decision but we need to make sure the decision will be implemented. We need to make sure they stop," forest campaign team leader Arie Rompas said.
He warned the government could reissue the permits later or the companies could appeal the decision in court.
The activist said the government should also revoke the operating permit for the fifth company.
A report last week by Climate Rights International alleged the Indonesian government was allowing environmental damage and violations against Indigenous people to go unchecked by nickel mining firms in the eastern Maluku islands.
Processing and mining operations have grown there around Weda Bay, the world's largest nickel mine by production, but have led to locals reporting a spike in air pollution from smelters and rivers polluted by nickel tailings in soil carried by rain.
An AFP report last month detailed how the home of the nomadic Hongana Manyawa tribe was being eaten away by that mine, with members issuing a call for nickel companies to leave their tribal lands alone.
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