The drought in 2007 and 2008 cost the New Zealand economy $2.8 billion, a Ministry of Agriculture and Forestry report shows.
The total cost to New Zealand's primary sector was $1.9 billion on-farm and $900 million off-farm.
Major effects of the drought included reduced quality of stock going into the next breeding season, reduced quantity of milk from dairy farms and increased costs from buying in supplementary feed.
The report says Waikato, Manawatu-Wanganui and Taranaki suffered most from the drought, which started in the spring of 2007 and continued through to autumn last year.
Regions extending from Gisborne to North Canterbury and parts of the central North Island were hit by drought again this year, leaving about a quarter of the country still suffering the effects.
Agriculture Minister David Carter says the sheer size of that economic impact reflects just how important the primary sector is to New Zealand.
The drought has been pinpointed by the Treasury as one of the reasons New Zealand went into recession earlier than some other countries.