"The advice has been that the best option is to establish a new primary school, and there will be a formal consultation process with the community over the coming months."
Kaye said the new primary school would be built in two stages to provide for an extra 400 students.
The first stage is expected to be completed, and part of the new school open, in 2019. The second stage is expected to be completed by 2020.
"There will be significant investment in site infrastructure to enable a potential third stage in the next ten years if required, so that over time the new school could accommodate up to 800 students," she said.
"This is an exciting development which will add significant capacity to the local school network.
"This is about ensuring we can future-proof for growth in Wanaka and give certainty to the community about education provision for many years to come."
There are more than 1500 students in Wanaka and the new school will enable the area to accommodate more than 1900 students.
"With growth occurring in many parts of New Zealand as well as Wanaka, it's important that the Ministry is well resourced to plan for future school investments," said Kaye.
Further announcements will be made about investments in school property under Budget 2017 in the coming weeks.