The youth justice age will be raised to 18 - a move that has been welcomed by the Human Rights Commission, but greeted warily by the police union.
The announcement was made today by Justice Minister Amy Adams and Social Development Minister Anne Tolley.
The changes, to be introduced by 2019, will mean lower-risk 17-year-old offenders will be dealt with by the Youth Court.
However, serious and violent 17-year-old offenders will continue to be dealt with by adult courts.
Serious offences will include murder, manslaughter, sexual assaults, aggravated robbery, arson, or serious assaults.
For other serious or repeat offenders, aged 14 to 17, the law change will strengthen the existing ability to individually assess which court should deal with the matter.
Adams said the Youth Court was not a soft option.
"Instead it offers our best opportunity to break the cycle of reoffending. It's shown that it is effective at reducing crime and holding young offenders to account, by giving them tough but targeted punishments when they commit crime."
Adams said the Youth Court offered young offenders rehabilitation and support to tackle the underlying causes of their offending.
The changes would have a particularly positive impact for Maori, who were over-represented in the justice system.
"We know the Youth Court can provide effective incentives to steer youth away from a lifetime of crime."
The changes were expected to take some 4873 cases out of the adult system, and lead to 265 fewer recidivist offenders each year.
Human Rights Commission chief David Rutherford said the move was positive.
"Children's rights advocates in New Zealand have been calling for this change for years in order to bring our children's legislation more fully in line with the Convention on the Rights of the Child. This is also a great acknowledgement of their efforts.
"Getting the youth justice age raised is an indication for the Government taking action on issues that are impacting our young people, however this work must continue."
The Police Association was more cautious, with president Chris Cahill saying it was vital for the Government to adequately resource the expanded youth justice system.
A survey of its members earlier this year found 73 per cent were opposed to the change. Only 45 per cent of Youth Aid officers supported the change, and only then with additional resourcing.
"The last thing we need is any increase in our workload and we are concerned that this move is based on youth court numbers and not the myriad of other ways Youth Aid officers work to keep the majority of child/youth offenders out of any courtroom," Cahill said.
"The arrest and interview process for a child/youth offender is a much more complex and often time consuming process than for an adult."
Tolley said raising the youth justice age was recommended by the independent expert panel on the overhaul of care and protection.
"At the moment many of these young people are written off at the age of 17.
"We know that once many of them go to an adult prison and associate with gang members and hardened criminals it increases the chance of them reoffending, creates more victims and costs the taxpayer even more money."
The changes could help improve "their long-term life outcomes and their communities".
The Government would boost youth justice resources ahead of the changes, including increases in the numbers of police youth aid officers, social workers, family group conferences, and programmes to address the complex needs of young people with mental health and drug issues.