How severely people are dealt with for possession of illegal drugs or drug utensils is to be reviewed - with officials to focus on whether action is proportionate to how much harm an offence causes.
Associate Health Minister Peter Dunne has released the 2015-2020 National Drug Policy, which could significantly reform the treatment of drugs such as cannabis.
Mr Dunne said three words - compassion, innovation and proportion - were of the utmost importance when developing drug policy.
The policy has been hailed as hugely significant by the NZ Drug Foundation, who say it signalled an armistice in "The War on Drugs".
"[It] all adds up to a signal that changes need to happen with how we deal with low-level drug offending," said executive director Ross Bell.
The new national drug policy has five priority areas, one of which is "getting the legal balance right".
Speaking at the launch of the policy, Mr Dunne said the Ministry of Health would work with the Expert Advisory Committee on Drugs to make sure that drug classification decisions were focused on harm.
"They will also commence work to examine whether the laws and enforcement around drug possession and utensil possession are still reasonable compared to the severity of these offences.
"The laws we make need to be reasonable, and it is crucial that our enforcement response is proportionate."
A 2011 review of the Misuse of Drugs Act by the Law Commission recommended that the whole Act be replaced, but Mr Dunne said changes could instead be made within the boundaries of the current law.
The policy release comes after a judge this month spoke of his discomfort in jailing Kelly van Gaalen for two years, after finding the respected community member guilty of possession of cannabis for supply.
Mr Dunne told the Herald that the policy did not show the Government was moving towards official or unofficial decriminalisation of some drugs.
Mr Bell agreed, and said the policy was a subtle shift towards treating the abuse of drugs and alcohol as a health issue - meaning prevention, education and treatment should take priority over the criminal justice approach.
"The policy isn't saying we need to 'free the weed'...but it does say that we need to look at practical actions to reduce drug harm, including the harm from law enforcement itself."
Police were already employing practices such as pre-charge warnings to divert low-level drug offenders away from the criminal justice system, Mr Bell said, but this was applied unevenly.
Dunne: Officials will re-examine the prescribing process for Sativex
Mr Dunne has also announced that officials will re-examine the prescribing process for Sativex, New Zealand's only medicinal cannabis product.
The mouth spray is the only form of medicinal cannabis currently available, but is not funded by Pharmac and costs about $1300 a month.
Last month the Herald reported that Pharmac, which is responsible for deciding which medicines get subsidised, planned to discuss the Sativex spray with its primary clinical advisory committee.
Mr Dunne said officials would now also look at whether it was too stringent that the Ministry of Health had to approve prescriptions of Sativex, or whether medical practitioners could make that decision.
Earlier this year, 19-year-old Alex Renton's family campaigned for him to be given medicinal cannabis and in June he was prescribed Elixinol, a cannabidiol made from hemp. Mr Renton died on July 1 at Wellington Hospital after suffering an acute prolonged seizure in April.
When the oil was approved for use in June, Mr Renton was the first person in New Zealand to receive the cannabidiol in hospital.
His mother, Rose Renton, said the medicine should be a "first line" treatment. Ms Renton secretly gave Alex doses of Elixinol after another New Zealand mother sent it to her.