Cabinet has approved lowering the blood alcohol limit from 80mg per 100ml of blood to 50mg for drivers over 20.
The legislation to change the law will have its first reading in Parliament before Christmas, Transport Minister Gerry Brownlee said.
"Alcohol impairment is a major cause of road accidents in New Zealand, with an average of 61 fatalities, 244 serious injuries, and 761 minor injuries every year caused by at-fault drivers who have been drinking,'' he said.
"The social cost of these injuries and fatalities is $446 million - a huge sum in a country of our size.''
A two-year review of the impact of a 30mg reduction in the legal limit suggested 3.4 lives would be saved and 64 injury-causing crashes avoided each year, equated to savings of $200 million in social costs over 10 years.
"Data collected by police over the past 22 months shows 53 drivers were involved in fatal and serious injury crashes with blood alcohol readings of between 51 and 80 milligrams per 100 millilitres of blood,'' Mr Brownlee said.
Under the changes, the penalty for returning a positive test between 50mg and 80mg would be a $200 fine and 50 demerit points.
Testing positive to more than 80mg would remain a criminal offence.
"We know that drivers with a very high blood alcohol concentration, and recidivist drink drivers, are responsible for a much higher proportion of alcohol-related road fatalities. That is why we believe this fine-based approach at the lower end is most appropriate,'' Mr Brownlee said.
The change will bring New Zealand into line with Australia's legal alcohol limit of 50mg per 100ml of blood.