The government may regulate to reduce the number of cattle that farmers are allowed per hectare of farmland.
Environment Minister David Parker said there wouldn't be a direct cap on the number of cattle, but instead work was being done on restricting the amount of nutrients being lost from farm to waterway.
He said there were clearly too many cows on some paddocks.
"In some areas the number of cows per hectare is higher than the environment can sustain," Mr Parker said.
Mr Parker told TVNZ's Q and A he wanted to stop the degradation of waterways and improve water quality over time.
He ruled out compensation for farmers who may be forced to reduce stock numbers.
"No, you don't compensate people for stopping polluting. Just because you could pollute last year doesn't mean you should be allowed to do it all, or paid to stop doing it."
Mr Parker said there hadn't been an economic analysis done on how his plans could affect economic growth, as the modelling would be too difficult.
However, the National Party said the government risked serious damage to New Zealanders' livelihoods by moving to regulate cattle farming.
Its economic development spokesperson Paul Goldsmith described Mr Parker's comments as wishful thinking.
It was much easier to stop doing things than it was to find viable replacements that would provide a good standard of living to people living in the regions, he said.
Mr Goldsmith said the government should get its head out of the clouds and be more realistic.