The Minister of Internal Affairs and United Future leader's comments were made as fallout from the Christmas Island detention centre riot continued.
"The modern concentration camp approach Australia has taken is simply wrong," Mr Dunne wrote in an opinion piece for The Age newspaper in Melbourne, and on his blog this week.
Mr Dunne said he agreed Kiwis who committed crimes in Australia should be convicted, and ultimately deported.
But he said New Zealanders awaiting deportation were being kept in camps comparable to those of Guantanamo Bay, "Northern Ireland in the 1970s" or "Israel today."
Concentration camps were widely used in World War 2 as part of the Nazi regime's policy of confining, enslaving, and often killing Jews and other persecuted minorIties.
The British Empire also used concentration camps in South Africa to detain Boers, or Afrikaners, during the 1899-1902 Anglo-Boer War.
Mr Dunne, however, said New Zealand should "not stoop to the name-calling that has passed for debate over the last week."
He said Australia was a sovereign state so New Zealand could not force it to change its laws.
"Our Prime Minister is right on that score. But we can, and should, be speaking out as loudly and as frequently as we can against abhorrent practices, especially given the mantle of family Australians like to drape upon us."
