Associate Health Minister Tariana Turia said banning tobacco branding and selling cigarettes in drab boxes plastered with explicit health warnings "will remove the last remaining vestige of glamour from these deadly products".
"Currently the packaging does everything it can to attract consumers and increase the perceived appeal and acceptability of smoking," she told reporters.
"The move to plain packaging would make more explicit what tobacco is -- a product that kills 5,000 New Zealanders a year."
The move was widely anticipated after New Zealand gave support in principle to plain packaging last year and praised Australia's pioneering efforts.
The packaging was introduced in Australia in December, meaning all cigarettes must be sold in identical, olive-brown boxes bearing the same typeface and large health warnings bearing graphic images of diseased smokers.
Turia said the government would introduce legislation later this year but delay enforcing it until legal challenges launched by tobacco firms against Australia's ban had been decided.
She said it was almost inevitable that cigarette manufacturers would also take legal action in New Zealand but the government was determined to press on with the change.
"We know we've got trade obligations but we are confident plain packaging can be introduced with those," she said.
"I know that when we look back we will know we had made the right decision today."
The Cancer Society of New Zealand said it was "over the moon" at the government's decision, while Action on Smoking and Health (ASH) said it would prevent tobacco firms using marketing to hook customers.
"The lives of New Zealanders are being put above the interests of the tobacco giants," ASH director Ben Youdan said, adding that he would have preferred for the ban to be introduced immediately.