Ministry for Primary Industries officials will investigate how a genetically engineered fungus was used outside the approved containment facilities at Lincoln University's campus.
The Beauveria bassiana fungus occurs naturally in soils throughout the world and infects a wide range of insect species. It is used as a biological insecticide to control insect pests.
A ministry spokesperson, Roger Smith, says the fungus was found indoors in glasshouses and laboratories, and is unlikely to have spread further.
He says there is no evidence to suggest genetic alterations to the fungus pose a health risk to humans or animals.
Mr Smith said officials are working to ensure there are no further breaches and will later investigate how the breach happened.
Lincoln University says it was given the fungus by Agresearch under the belief it was a wild strain but researchers then discovered a genetic marker had been added to its DNA.
It says because it initially believed the fungus was wild, it was grown in laboratories and greenhouses which were not approved GE containment facilities.
Green MP Steffan Browning says the containment breach may be a biological threat and should be treated as seriously as previous breaches of genetically engineered trials.
GE Free New Zealand has responded by calling for an overhaul of the legislation for GE organisms to enforce strict liability.