The Australia New Zealand Food Standards Authority does not see any health or safety issues in allowing the use of hemp seed in food products.
The authority is considering legalising the sale of processed hemp seed for food.
Hemp is currently restricted because the seeds contain the active cannabis ingredient THC.
The authority's general manager Dean Stockwell says processed hemp seeds could safely be used because they have very low levels of THC.
He says a range of products might be possible, such as flour, protein powder and oil, as well as products such as beverages that are made from those ingredients.
The country's largest hemp producer Midland Seeds has been growing hemp for about 10 years to extract the oil from the seeds.
But until the regulations are changed, the oil can be used only in products that are not consumed by humans and the rest of the seed ends up as animal feed.
A director Andrew Davidson says hemp seed is used in food products elsewhere in the world, including the United States, Canada and Europe.
He says removing the restrictions in New Zealand would open up new uses for the crop as a source of high quality protein in food.