Landcorp says the Office of Treaty Settlements waived any right Ngati Whakahemo has claim to land up for sale near Pukehina.
The Bay of Plenty iwi is distraught it has been told to tender for the whenua and dairy farms it says were confiscated by the Crown.
But Landcorp general manager of property and environment Phil McKenzie says the OTS has waived the tribe's right to the land, which means it sells to the highest bidder.
He says other iwi have expressed interest in the parcel, and tenders close at 4pm on Wednesday.
Te Runanga o Ngati Whakahemo chair Mita Ririnui says the iwi will seek an urgent hearing in the Waitangi Tribunal if it doesn't win the tender.
He says his iwi is prepared to fight the good fight and has no option but to follow that path.
The iwi was wrongly included in the Te Arawa Affiliates Settlement in 2008, and it wants its own claim dealt with before the sale goes ahead, Mr Ririnui says.
Labour spokesperson for Maori Development Nanaia Mahuta says the move shows the Government is turning its back on doing business with iwi.
She says it's a double-standard that it assures New Zealanders "mum and dad'" investors will get a stake in State asset sales while government-owned Landcorp will not provide interest to iwi.
It reinforces the Government's agenda, which she says is to sell off assets for a quick dollar to overseas bidders.