The packaging law "will remove the last remaining vestige of glamor from these deadly products," Associate Minister of Health Tariana Turia said in announcing the plan Tuesday.
New Zealand already has increased cigarette taxes and makes retailers hide packs below the counter. The new legislation would follow an Australian law that took effect in December and replaced logos on packs with graphic warnings including cancer-riddled mouths.
The proposed law could be introduced in Parliament later this year to take effect when the trade case over Australia's law plays out next year at the earliest.
Tobacco companies lost a legal challenge in Australia's highest court last year, but the World Trade Organization has agreed to hear a complaint about the law from several tobacco-growing countries led by the Ukraine.
The Ukraine, Zimbabwe, Honduras, the Dominican Republic, Nicaragua and Indonesia argued that governments should pursue health policies "without unnecessarily restricting international trade and without nullifying intellectual property rights."
New Zealand, Norway and Uruguay have lined up behind Australia in the WTO case. Uruguay told the trade body it couldn't remain silent about "the most serious pandemic confronting humanity."
Turia said the New Zealand government wants to minimize its legal exposure by waiting until the outcome of the Australian challenge. Even so, she said, the government is planning to set aside up to 6 million New Zealand dollars ($5.1 million) to defend against possible lawsuits from the "very litigious" tobacco companies.
Steve Rush, the New Zealand general manager of British American Tobacco, said in a statement Tuesday that the company is exploring its legal options.
"We expect to see numerous repercussions as a result of the government ignoring several international agreements as well as setting a dangerous precedent for other industries," he said.
Many countries mandate that packages display photos or text describing smoking's health effects, and some limit the size of the branding or ban certain slogans, but Australia's dual approach is the strictest globally.
New Zealand has set itself a target of eliminating smoking altogether by 2025. Turia said the government would consider introducing further measures, such as banning smoking in cars and public places and further hiking taxes.