"As New Zealand's Queen and much loved Sovereign for over 70 years, it is appropriate that we mark her life of dedicated public service with a State Memorial Service and a one-off public holiday," Ardern said.
"Queen Elizabeth II was an extraordinary person, and I know many New Zealanders will appreciate the opportunity to both mark her death and celebrate her life."
Ardern said the public holiday allowed people to pay their respects and for communities around the country to come together and pay tribute with local events.
"The decision to hold a one-off public holiday in the Queen's honour is also in line with similar holidays in the UK and Australia, and is in keeping with what is an historic event."
Ardern confirmed she, alongside the Governor General, would represent New Zealand at the Queen's funeral in London, departing New Zealand on September 14.
Further details on Ardern's travels will be released in coming days.
The death of the Queen was announced on Friday (NZT) and her funeral will be held at Westminster Abbey on Monday, September 19.
A period of national mourning started immediately after the Queen's death was announced and will continue until the date of the National Memorial Service.
Ardern previously said New Zealand's memorial service would be held at some point after the funeral in the UK - and turned its mind this afternoon to setting the date when it meets today as well as whether to have a public holiday.
A one-off national public holiday has been confirmed in Australia on September 22. Prime Minister Anthony Albanese said the move was "in honour of the life and service" of the late Queen and would coincide with a memorial service.
BusinessNZ chief executive Kirk Hope told RNZ's Morning Report businesses had already suffered losses from the pandemic and the government had to be careful when making a call that would impose more costs on local businesses.
"Certainly I don't think there's any problem with a memorial, I think there'll be a lot of people who will be wanting to attend that but to add another public holiday, as I said, at a time when many businesses have struggled is a bridge too far."
Even a half-day public holiday would still be costly for businesses, he said.
"We prefer not to have that."
King Charles has announced the day of the Queen's funeral - September 19 - would be a bank holiday in the UK.
Hospitality industry not convinced
The hospitality industry in general supported the announcement of a public holiday to mark the passing of the Queen, but the Restaurant Association came out against it.
"While most in hospitality are joining the world in mourning Queen Elizabeth II, another public holiday represents an additional cost to an industry on its knees after two years of subdued trading owing to Covid responses including lockdowns, guest restrictions and other limitations," said Marisa Bidois, CEO of the Restaurant Association.
"This period has seen forced closures, increased regulatory compliance costs and rising minimum wages, struggles securing and retaining local staff, and difficulties hiring and employing immigrants.
"Already, 2022 has seen the introduction of Matariki as a new public holiday, bringing the total number of statutory days off to 12. Every public holiday presents challenges for hospitality businesses, often exacerbating staff shortages, driving up wage bills and other costs, and potentially interfering with regular trade."
Julie White, chief executive of Hospitality New Zealand, said it was now up to individual businesses to decide whether or not to open on the day.
"It's a good thing we are able to acknowledge, as a country, the Queen's exemplary service to New Zealand during the 70 years of her reign," Chief Executive Julie White said.
"We know every public holiday comes at a cost for hospitality and accommodation businesses due to having to pay penalty rates, but we believe this one-off day is worth it.
"She had a very positive effect on New Zealand and leaves a tremendous legacy. She really stepped up and gave our country devoted service, and it would be great if we can use this day as an opportunity to remember that and to thank her.
White said they are unsure how many businesses will be open due to the extra costs, but "maybe this will be different to other public holidays".
"In the end it's up to each operator and business to gauge the effect of opening on their business and decide accordingly.
"Some will not open, and after the past few years of struggle, who can blame them," White said.
"But those that can will no doubt welcome the chance to help people raise a toast to the Queen."
