Regions free within island (8)
I believe the answer is:
counties
'regions' is the definition.
(county is a kind of region)
'free within island' is the wordplay.
'free' becomes 'untie' (I've seen this before).
'within' is an insertion indicator.
'island' becomes 'cos' (Greek island).
'untie' going inside 'cos' is 'COUNTIES'.
(Other definitions for counties that I've seen before include "administrative areas" , "Administrative divisions" .)