Foreign Minister Winston Peters says recognition of Palestine as a state is a matter of when, not if - but New Zealand would need to see a Palestinian election first.
With other nations including Ireland, Spain and Norway taking the step, opposition parties have also been pushing for it. The three countries will make the formal recognition later this month - saying it was hoped other western countries will follow suit.
Foreign Minister Winston Peters told reporters at Parliament that New Zealand supported the idea, but some conditions would need to be met first.
"We've always believed in the two-state solution, and we also believe it's a question of when not if," he said.
"However, how would you recognise a utility or a unity that doesn't exist? Who would speak for them? How would it start? The first three questions you ask as to statehood they can't answer, and we're staying where we are as a consequence."
He referred back to New Zealand's latest vote on it at the United Nations.
"We agreed but with the proviso and a condition as to what it meant. Some nations abstained and some said no, most said yes, but we said 'Yes but only on these conditions: that they have the capacity to be called a state'."
Speaking to reporters in Lower Hutt this afternoon, Prime Minister Christopher Luxon linked recognition to the success of the two-state vision.
"We've been longstanding advocates of a two-state solution. For that to happen, Palestine does need to get recognised as an independent state," he said.
"But, you know, you've seen us actually, ah, support a couple of weekends ago actually enhanced recognition and participation for Palestine at the United Nations. That's been an important step for us.
"But really right here right now what's needed most is for hostilities to cease, hostages to be released, aid to be delivered into Gaza and a negotiation and a peace process to commence so that we can start to drive into that two-state solution."
He said New Zealand wanted to see urgency around peace and the peace process and seeing a two-state solution emerging.
"That's why we have been urging Israel to make sure it is compliant with international law, ensure that it gets aid into Gaza, equally we need Hamas to release hostages. And we need both parties to get round a table to negotiate a peace settlement and ultimately start the process around a two-state solution."
Green Party co-leader Marama Davidson said recognition of Palestine was the right thing to do.
"It's about permanent peace, and the reason behind the unrest and what is now a current genocide by Israel is because Palestinians deserve a right to self-determination and to statehood, and the Greens have always supported that."
Labour MP Phil Twyford spoke to pro-Palestine protesters this morning and said they had called on the government two weeks ago to invite the head of the Palestinian delegation to offer his credentials in Canberra.
"I think that this government, it takes its bearings from Canberra and London, and it's the white Western powers that have given Israel cover," he said. "I think Israel's destroyed its moral standing."