The government is extending its military training operation in Iraq by 18 months and will send some troops to a second location, Prime Minister John Key says.
Mr Key made the announcement at this afternoon's post-Cabinet media briefing.
He said the existing deployment of up to 143 defence personnel would stay at Camp Taji to train Iraqi Security Forces in the fight against the so-called Islamic State (IS - also known as ISIL or Daesh) until November 2018.
The Cabinet has also agreed to allow a small number of those personnel to provide training to stabilisation forces, such as the Iraqi federal police.
Mr Key said those personnel would travel to Besmaya, a secure training location about 52km south-east of Taji.
"The vast bulk of the training our soldiers conduct will continue to take place at Camp Taji, in the same behind-the-wire environment they've successfully operated in for over a year," Mr Key said.
"However, there will be a change in the mix of who they are training. This reflects the progress we've made and the evolving needs in Iraq as land is recaptured from ISIL."
Defence Minister Gerry Brownlee said, at Besmaya, New Zealand troops would ensure there was a smooth handover of the Iraqi soldiers they had been training at Camp Taji to other coalition trainers, who would then teach them to use heavy weapons.
"To date, this has been a successful mission, and the value we're providing the Iraqi Security Forces to rid their country of Daesh is increasing all the time.
"So it makes sense to continue doing something that adds value to the likelihood of Iraqi peace and security in the future, and to amend our mission to meet the changing environment in Iraq."
The total cost of the operation would rise from about $40 million to $50m, he said.
Mr Key said he had been assured that the training base at Besmaya had been made as safe as it could be, and that it was on a similar scale of risk to Camp Taji.
The handover process that would happen at the base was expected to take about two days.
Labour leader Andrew Little said the government had not made the case to justify extending New Zealand's mission to Iraq.
Labour's initial objections were that the Iraqi Army had a poor track record, despite years of training from the United States and other countries - and, having visited Camp Taji himself in April, he said he still held that view.
The government had not been open with the New Zealand public about the demands being made on it by coalition partners, Mr Little said.
Regardless of the position his party took, New Zealand troops in Iraq had Labour's full support, he said.
About 7000 Iraqi Security Force personnel have been trained by the Australia-New Zealand mission at Taji, including about 975 officers who have graduated from four junior leadership courses.
At the moment, there are 105 New Zealand Defence Force personnel and 300 Australian Defence Force troops deployed at Camp Taji.