The Pillars group, which provides support to children and families of those in prison, has obtained lottery funding for a three-year research project.
It will look at 250 prisoners and 40 families to see how children are affected emotionally, physically and economically.
Liz Gordon of Network Research, which will undertake the study, says internationally studies have shown children can suffer severely when a parent is in prison.
But she says the situation in New Zealand is unknown.
Dr Gordon says researchers hope to have findings from their first round of studies by August.