The isolated island, an Australian territory that lies south of Java, Indonesia, has long been used to detain asylum seekers.
However, New Zealanders who have previously served jail time in Australia are now being sent there and held for months.
Up to 75 New Zealanders and Pacific Islanders could be held on Christmas Island awaiting deportation, with about 20 Kiwis arriving in the past few days, Radio New Zealand reported this morning.
Prime Minister John Key says he is concerned about Australia toughening up its rules, and making anyone not an Australian citizen who served more than a year in prison liable for deportation.
"We sometimes deport people ourselves…but our threshold is much higher. My sense is that the Australian threshold is too low. At the best chance I can I will raise that with [new Australian Prime Minister] Malcolm Turnbull.
"There are some people that are potentially going to be deported to New Zealand now…that are of a very low threshold of criminal activity, but no community of interest with New Zealand," Mr Key said.
"They may well have gone over there as a child, they may have no family in New Zealand, there is no connection with New Zealand. And it just doesn't make sense to be deporting them to New Zealand."
On the reports of increasing number of New Zealanders being held on Christmas Island, Mr Key said he had no real idea of the numbers, or why they were being sent to the island.
"I don't have anything other than anecdotal information on that, so I wouldn't really want to comment…we don't have perfect information on that.
"We are working on it. It may well be that they have come out of the correctional facility they are in waiting on deportation, but we need to get better information."
Labour's Foreign Affairs spokesman David Shearer said New Zealand needed to apply pressure to sort out the issue, because if it was not resolved quickly it could sour the Trans-Tasman relationship.
Mr Shearer said he suspected Australia's laws were targeted at other groups, and New Zealanders who had lived long-term in Australia had been caught up in that net.
"[They] for all intents and purposes consider themselves Australians. They will certainly be cheering for the Wallabies in the World Cup.
"I am hoping that it is unintended, that is something that wasn't foreseen when the legislation went through, and that it is something we can fix pretty quickly."
Mr Shearer said he had concerns about how seriously National were taking the issue.
"John Key two weeks ago said he didn't have any details in front of him. When he was asked yesterday he said, again, he didn't have any details. Well, I think it's time for him to get some details.
"He has got to know, and he has got to be quite forceful in saying, 'we don't believe this is acceptable or in according with the principles of natural justice."
