A bill that would bring together all 16 of the country's polytechnics by establishing the New Zealand Institute of Skills and Technology (NZIST) has passed its third and final reading in Parliament.
The Education (Vocational Education and Training Reform) Amendment Bill passed 63 votes to 57.
Education Minister Chris Hipkins said the current system discourages collaboration and pits polytechnics and on-the-job training providers against each other.
"Learners are often the ones caught in the cross-fire and employers don't get the skills they need," he said.
Hipkins said the changes will bring together a coherent system of on-the-job apprenticeships and off-the-job training for the first time since apprenticeships were abolished in the 1990s.
"The bill ensures academic freedom for staff at the NZIST while allowing industry to take a leadership role in identifying the skills needed in the workplace through workforce development councils.
"The bill will lead to better outcomes for students, industry and the regions, and provides support for staff during the transition to the new system," he said.
But the National Party said the Government's tertiary reforms will gut New Zealand's regional education.
National's tertiary education spokesman, Dr Shane Reti, said regional polytechnics will now have their assets hoovered up by the Government and they will lose local decision-making.
"National has vigorously opposed this bill, it will see all regional polytechnics centralised into one mega polytechnic and will move apprentices from industry to polytechnics."
Reti said it would be devastating for high-performing polytechnics, such as the Southern Institute of Technology.
"At a time when we need more apprenticeships, these reforms will result in thousands fewer learners and thousands of job losses," he said.