Figures shows 15.1% of Kiwis 15 and over smoking, down from 20.7% six years ago.
The fall of more than a quarter in the prevalence of smoking, hailed by tobacco-control groups, mirrors the declining sales of cigarettes and loose tobacco.
Data from this year's Census shows 15.1 per cent of people aged 15 or older smoked daily, down from 20.7 per cent in the 2006 Census.
The Quitline called this a monumental reduction and Associate Health Minister Tariana Turia said it was a huge decline.
The Statistics NZ ethnic breakdown shows smoking prevalence among Maori had declined to 32.7 per cent last year, from 42.2 per cent in the previous Census.
Among non-Maori, it fell to 12.6 per cent this year, from 17.8 per cent.
Otago University public health expert Associate Professor Nick Wilson said the overall reduction in the number of smokers "seems credible given the decline in national tobacco sales". From 2006 to 2012, sales fell by 20 per cent, to 2.07 million kilograms.
The Census figures do 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 means 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 decline in the prevalence of smoking. "We are very pleased ... it's still too far out to know whether this will bring us to smokefree 2025 [but] 15 per cent is well on track to be hitting that 10 per cent by 2018."
To make sure New Zealand reached the 2025 target, he urged the Government, in addition to its programme of tobacco tax rises, to introduce further tobacco-control measures such as plain packaging of tobacco, a ban on smoking in cars containing children and the removal of the duty-free status for travellers bringing tobacco with them into New Zealand.
He also called for registration of tobacco sellers, and more government control of tobacco ingredients.
Quitline chief executive Paula Snowden said the fall in use sent 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."
The tax on tobacco will increase by 10 per cent on January 1.