Filmed in Vanuatu, 'Tanna' is a tale of forbidden love and the struggle between the old way and the new, enacted by the Yakel tribe.
Filmmakers Bentley Dean and Martin Butler developed the story with the local community, many of whom had never seen a film before.
Mr Dean described being in a state of disbelief after waking up to news of the nomination.
“We weren’t thinking at that stage, ‘oh yes, we’ll be nominated for an Academy Award, for sure'," he told SBS News.
"So when the news came through it was sensational," he said.
“It’s what people see as the premier of film awards of the world. So it’s a good sign, right?
“We’re particularly pleased and blessed. In our category, we live in a country of hundreds of languages and in a region with many hundreds more and I just love the fact that within the Academy Awards, there’s a celebration of knowing the cinematic voice doesn’t belong to just one language.”
Mr Dean said there was more to the film than just telling a story - they aimed to show the community's cultural identity to the world.
“They’re so proud of their culture," Mr Dean said. "In fact, I think that’s one of the main reasons this film has been made.
"They know they’re on to some good stuff, and they want to share it with the rest of the world.
“Here we have a culture, a people, of which only a few thousand people speak the language. So it’s different from the rest of the world.
"And yet, here is a film that’s just a novice in terms of making cinema. They’ve never even seen one let alone make one and here they are at the Academy Awards.
"So I think that speaks volumes to the representation of diversity in Hollywood.”
Australia 'punching above its weight'
Mr Dean and Mr Butler were nominated for an Oscar alongside fellow Australians Mel Gibson for 'Hacksaw Ridge', which received six nominations including best picture, and Garth Davis’ 'Lion', which also had six nominations.
Mr Dean said the number of other Australians nominated at this year's awards sends a strong message.
“I guess clearly, we’re punching above our weight," he said. "It’s an over-representation of Australians.
“I think they’ll see the quality of talent that seems to come out of this country and draw the inevitable conclusion of, ‘Jeez, they’re really good at this stuff, aren’t they?’
"You’d have to ask what other people will think of it but I imagine that sort of conclusion is a bit inescapable.”
