Two of the country's players, Samisoni Viri and Kitione Taliga, are from Dratabu village near Nadi.
Around 400 people packed into Dratabu's community hall.
Teachers brought children from nearby schools to watch the match.
The crowd was ecstatic and grown men cried as Fiji smashed Great Britain 43-7 to win the gold medal.
Dratabu chief Ratu Meli Saukuru said people were immensely proud of Viriviri, Taliga and the rest of the Fijian team.
"We are really proud and feel so great this morning and we are overwhelmed," he said.
Viriviri's mother Vikaili Rabale said having two locals in the team made the victory especially sweet.
"The village is so proud and happy and all waiting for their return and we're going to host a big party for them," she said.
Prime Minister Frank Bainimarama said the gold medal win was a wonderful moment in Fiji's history.
Not only is it Fiji's first medal, but also the first time a small Pacific nation has won Olympic gold, and the win is being celebrated around the region.
It also comes six months after Cyclone Winston killed 44 people and caused extensive damage to large parts of Fiji.
Resource: abc.net.au
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