Adults' rate of smoking has declined to 15 per cent in the latest census, down from 20.7 per cent in 2006.
Census 2013 counted 463,000 adults who smoked one or more cigarettes a day, compared with 598,000 at the previous census.
The data does not include people who smoked tobacco in cigars, pipes or cigarillos.
The Ministry of Health's 2011/12 survey of people 15 and older found a daily smoking rate of 16.5 per cent. That survey defined smoking to include all tobacco products.
The Government's official target is that New Zealand will be substantially "smokefree'' by 2025, which is generally understood to mean a prevalence of less than 5 per cent. The mid-term target is 10 per cent by 2018.
Action on Smoking and Health (ASH) communications manager Michael Colhoun welcomed the ongoing reduction in the prevalence of smoking.
"We are very pleased with the figures. It's still too far out to know whether this will bring us to smokefree 2025. Fifteen per cent is well on track to be hitting that 10 per cent by 2018.''
To make sure New Zealand reached the 2025 target, Mr Colhoun urged the Government, in addition to its programme of tobacco tax increases, to introduce further tobacco-control measures, such as plain packaging of tobacco, a a ban on smoking in cars containing children and the removal of the duty-free status for travellers brining tobacco with them into New Zealand.
He also called for registration of tobacco sellers, and increased Government control of tobacco ingredients, such as a reduced nicotine level and a ban on additives, including chocolate, that made cigarettes more palatable.
Quitline Chief Executive Paula Snowden said the drop in the smoking rate was "a monumental shift. We're thrilled to see such a big drop in the number of smokers in New Zealand. These figures validate the hard work of all of us in tobacco control and send a strong signal that we will rid New Zealand of tobacco products.
"There are over 135,000 fewer smokers in New Zealand. That's the equivalent of the entire population of Hamilton. We congratulate each and every one of these people who have battled to free themselves of this terrible addiction.''
Quitline is particularly pleased to see a steady decline in the rates of smoking within Maori and Pacific populations, which have always been notoriously high. Smoking prevalence among Maori has dropped from 42.2 per cent in 2006 to 32.7 per cent in 2013.