A dispute between Wellington City Council and the New Zealand Transport Agency could lead to the agency pulling support from plans to smooth the capital's traffic congestion.
The Transport Agency, the main road funder for New Zealand, wants to build a flyover past the city's Basin Reserve cricket ground.
Wellington City Council has supported the plan in the past but with strong reservations and has repeatedly suggested a range of alternatives.
The matter came to a head at a special meeting of the council on Wednesday.
The Transport Agency had sent the council a letter warning that withdrawal of support for the flyover would endanger future investment by the agency in other transport initiatives.
Despite the warning, the council voted 8-7 to press ahead and seek other options to the flyover. Wellington Regional Council came to a similar decision last month.
Wellington City Councillor Iona Pannett accused the Transport Agency of engaging in threatening behaviour inappropriate for public servants.
"What they have said could be interpreted as a threat against duly elected officials,"she told Radio New Zealand's Morning Report programme.
"Our support for the flyover should in no way be linked to other roading or public transport projects in the city."
Wellington Central MP, Labour's Grant Robertson, said his party would revisit the flyover plan if it is elected to Government.
Mr Robertson said the Government's recent decision to dig a trench under Buckle Street next to the Basin Reserve for the national war memorial would allow for a ground level alternative to the flyover.
But the Transport Agency said the design of the flyover was future-proofed to accommodate the trenching of Buckle Street if the project was approved.
The agency said the flyover is a crucial circuit-breaker that will enable a host of other transport improvements across Wellington.