Police insist they hold young people in custody only as a last resort - despite figures showing the numbers have almost trebled in the past three years.
But police say they accept the findings of a report that shows New Zealand is at risk of breaching international guidelines on the detention of young people.
A review by several agencies has found 213 children under 17 were held in police cells for more than 24 hours last year: only 76 were held in 2009.
Assistant Commissioner Nick Perry says that while police agree no young people should be held in cells, it is still a very small number out of the 31,000 young offenders officers dealt with last year.
Mr Perry says increasing the number of special secure units available for young offenders would be a good way to cut down the number held in cells.
International guidelines state that young people should be detained only as a last resort and for the shortest possible time.
A review by the Independent Police Conduct Authority, the Children's Commissioner and the Human Rights Commission says some people are being kept for too long in entirely unsuitable conditions.
There's a lack of alternative places to put the young, but other options, such as bail, are underused, it says.
Young people last year spent an average of almost two days in the cells - which were sometimes unclean, had little privacy, showering facilities or food provided.
Children's Commissioner Russell Wills says youth arrests are actually an opportunity to reduce New Zealand's prison population.
He says the police need to think of youth arrests as a way to help young people to turn their lives around.
Police say they will improve training, decision making, and reporting, to ensure young people are treated in a way that is likely to reduce reoffending.
Mr Perry says the policing of young people does present unique challenges.
He said a youth policing strategy has been issued, which sets out how they aim to meet international conventions.
Chief Human Rights Commissioner David Rutherford says there's a lack of information about why and how the police make decisions about young people in custody.
Mr Rutherford says it's vital the reasons behind those decisions are reported.