Parliament has passed the Biofuel Bill under urgency, meaning oil companies will have to meet new targets from 1 October.
Biofuels will have to make up 0.5% of total oil company sales.
The Government says motorists will not notice much difference in the price of petrol or the performance of their vehicles.
The Green Party says the move will go some way towards reducing New Zealand's oil dependency and carbon emissions.
National opposed the legislation, saying there is enormous international debate about the sustainability of biofuels.
However, Energy Minister David Parker says sustainability standards have been introduced for imported products.