Southland Regional Council has approved a new dairy conversion policy, despite strong opposition by some farmers there.
Chair Ali Timms says the policy makes all new farm conversions a discretionary activity, which means they must have a resource consent.
She says from 14 April, new applications can be declined if the risk to the environment is considered too great.
About 20 dairy conversions are under way in the region and 20 more are expected this year.
Federated Farmers says the rule is the first of its kind in the country.
Its Southland spokesperson Doug Fraser says the decision will deter people from buying farms in the region.
He says the rule will only affect a small number of farms, but it runs the risk of alienating all dairy and sheep farmers in the area.
Mr Fraser says the decision is very disappointing and it will sap confidence for investment in the province which will have wider economic ramifications.