While broadcast news faced statutory standards and sanctions, the same content accessed online or on an online app was not subject to the same standards, or any standards at all.
The regulator would have had the power to demand corrections or the removal of news content, but would not have been able to issue fines or compensation.
The minister said newspapers and broadcasters had already made good progress in dealing with the challenges of new media.
The media industry welcomed her decision yesterday.
Newspaper Publishers' Association editorial director Rick Neville said newspapers and magazines felt the Press Council was doing a good job and they had not been persuaded that a new body was required.
Former TVNZ head of news Bill Ralston said he was not surprised by Mrs Collins' decision.
"The Press Council is working, the BSA is working, by and large the mainstream media is well-covered. It really only leaves crazed bloggers out there who are unregulated, and do you really want to try and regulate them?"
Not all of the commission's recommendations were rejected - a chapter which outlined measures for tackling online bullying was fast-tracked by the minister and legislation is expected before the end of the year.
The commission said it expected the gaps and disparities in legal and ethical standards for traditional and online media to become more pronounced with the rollout of ultra-fast broadband.
Rejected
A new, independent media regulator for print, broadcast and online which would set standards and have powers to remove content, or demand apologies, censure or corrections
Accepted
A new agency to hear and act on cyber-bullying complaints and a new offence for inciting suicide online
