The Government has announced a new service medal on the eve of the Battle of Passchendaele commemorations.

About 160,000 people would be eligible for the medal to recognise those who served in the military for more than three years since World War 2, and those who did compulsory military training or national military service.

In a speech to the Returned and Services' Association conference today Prime Minister John Key said the organisation had wanted the new medal for years and a working group was set up last year to look at the idea.

"I am delighted to announce today that the Government has established the New Zealand Defence Service Medal subject to the Queen's approval," he said.

Cabinet had approved $3.85 million for the medal's manufacture and distribution.

"This is a fantastic way to give our servicemen and women the recognition they deserve."

The initial call for applicants will be for those aged 50 and over but it will be opened up to all others within a year.

Tomorrow is the anniversary of the Battle of Passchendaele where more than 2700 New Zealand soldiers were killed or wounded in 1917.