Smoke-free clauses will be added to community providers' contracts under a policy approved by the Southern District Health Board.
DHB-funded providers would be consulted about the move and their feedback reviewed later this year before the clauses were finalised.
Aged care providers would initially be exempt, until a national contract was negotiated next year, which was expected to include a smoke-free provision.
Board member Richard Thomson received an assurance at a recent board meeting in Invercargill funding would not be cut if providers could not make their premises 100% smokefree.
A staff report to the combined community and public health and disability support committee said the board did not expect legal issues to arise from the move.
The clauses state providers must have a smokefree policy in place by June 30, 2014, and that staff receive training to help clients quit smoking.
Miramare manager Kerry Hand was pleased to hear a pragmatic approach would be taken to implementing the policy. Miramare is a needs assessment agency that organises support services using DHB funding.
It was not realistic to compel some people to stop smoking if they were in a DHB-funded facility, although this typically meant smoking in an outside area already.
''When it becomes a problem round an individual, it becomes a huge problem,'' Mr Hand said.