Cadbury says it's cutting 145 jobs in Dunedin, as the plant focuses on the production of chocolate crumb and boxed chocolates.
The company made the announcement to a staff meeting on Thursday afternoon, via a videolink from Melbourne.
It is one of the biggest employers in the city with about 500 workers.
Cadbury's managing director of confectionary in Australia and New Zealand, Mark Callaghan, says the move will increase productivity and profits.
The production of blocks of chocolate and chocolate bars will move to Australia.
However, Cadbury has also announced 185 job losses at plants in Tasmania and Victoria.
The first workers affected are likely to be made redundant early next year, with the last to go by 2010.
Mr Callaghan says the company will do all it can for its employees.
"We will be doing everything we can for our staff. We do genuinely care," he says.
"We will be providing support services to all our staff and really helping them plan for their future."