Under the new policy, suppliers must register with the Ministry for Primary Industries, meet hygiene requirements, test milk for pathogens, keep records of sales, and label the milk appropriately, Food Safety Minister Jo Goodhew said.
Ms Goodhew said raw milk was a "high risk" food, particularly for children, the elderly, pregnant women and those with compromised immune systems.
"After extensive consultation and review, the Government decision will allow farmers to continue to sell raw milk directly to the public from the farm and via home deliveries," she said.
The minister she recognised that people felt strongly about their right to buy and drink raw milk.
"Equally, I am also aware of the strong concerns about the public health risks associated with drinking raw milk and the potential risk to New Zealand's food safety reputation.
"We have worked hard to find the right balance between managing the risks to public health while recognising the demand from rural and urban consumers to access raw milk."
Requirements will be in place for those who trade raw milk, because no matter how carefully animals are milked the presence of harmful bacteria in unpasteurised milk can cause serious illness, she said.
The Government has looked at a number of options during this review and decided against prohibiting or limiting volume of sales of raw milk.
"Our focus has been to ensure raw milk is available for those who actively seek it, and that people are well aware of the risks associated with drinking it," Ns Goodhew said.
The new requirements for farmers who sell raw milk will come into force by March 1 next year.