Gisborne Hospital says an inquiry is underway after human tissue, including some bone tissue, fell out of a hospital rubbish bag at the city's waste and recycling station.
Chief executive of Tairawhiti District Health Board, Jim Green, says the bag split as it was being loaded on to a waste transporter.
He says it as an extremely unfortunate and isolated incident.
Mr Green says it appears human tissue was put in the wrong bag and taken to the transfer station with other general hospital rubbish.
Staff from the hospital worked alongside waste workers into the night on Wednesday to check all the hospital rubbish bags dropped off during the day.
That search turned up a second bag containing human tissue.