New Zealand will not sign up to phase two of the Kyoto Protocol and will instead make voluntary pledges under the Convention Framework.
The country will not face financial penalties if it goes above its emissions targets when the first commitment period finishes at the end of this year.
The protocol, adopted in Kyoto, Japan, in 1997, is aimed at fighting global warming by setting legally binding targets for countries to cut greenhouse gas emissions.
Climate Change Minister Tim Groser said on Friday that New Zealand remains committed to lowering its emissions.
The move breaks ranks with Australia, but aligns New Zealand with other major economies such as the United States, Japan, China, India and Russia.
Mr Groser said the Government has taken this option for two main reasons.
"First, because I think it's actually in New Zealand's interests and secondly, because for me it's a point of principle.
"When Kyoto covers 18 percent, it means 85% of global emissions are outside. There cannot be a serious person on this planet who thinks that we can deal with climate change without addressing the 85% of the emissions. The future is in the common space."
The minister said there is no suggestion that New Zealand is withdrawing from the Kyoto Protocol and would remain a full member.
He said the next step will be to set a formal target for New Zealand future emissions through to 2020.
Shameful day, say Greens
Opposition parties on Friday criticised the Government's decision not to commit to phase two of the Kyoto Protocol.
Green Party MP Kennedy Graham says it shows the lack of commitment by the Government to combat climate change and it is a shameful day for New Zealand.
"How can you say you're committed to Kyoto when the thing finishes in seven weeks and you're not renewing your commitment?
"It's quite a shameful day for New Zealand and the Key-Groser climate change policy regime has cast shame on this country."
Mr Graham says the decision puts New Zealand at odds with its closest trading partner, Australia.
The Labour Party believes the decision will indicate to the world that New Zealand is no longer committed to tackling climate change and this could damage its international, clean, green brand.
But Climate Change Minister Tim Groser disagrees.
"Well, I don't think our clean, green image is tarnished at all by our climate change position. Only in Europe, Australia and New Zealand have you got anything approaching a comprehensive price on carbon.
"The coverage of emissions is not complete - we're right bang in the middle of the only three areas of the world that actually have got a carbon price across the economy."
Australia to sign up
Australia's government says it is "ready to join" a second phase of the Kyoto Protocol on climate change.
Climate Minister Greg Combet said Australia was making the move because more action was being taken internationally to tackle climate change and replace the Kyoto deal, the BBC reports.
The "second commitment" period for Kyoto could renew pledges to limit emissions until 2020.
Australia is one of the world's leading emitters of greenhouse gases. The governing Labor Party signed up to the Kyoto Protocol in one of its first acts after winning power in 2007.