Christopher Luxon spoke to media, after Foreign Minister Winston Peter's announcement at the United Nations General Assembly that the government had decided against the move.
Luxon said New Zealand immediately condemned Hamas' October 7, 2023 attack on Israeli civilians, which killed 1200 innocent people and led to 251 people being taken hostage. New Zealand recognised Israel's right to defend itself and its people, he said.
However, the New Zealand government's view was that Israel's actions since then had been "grossly disproportionate, and have exacerbated and prolonged the suffering of innocent civilians", he said.
"This conflict will not end by New Zealand recognising the state of Palestine at this time. It will only end through a ceasefire reached through negotiation, dialogue, diplomacy and leadership, and that remains our focus."
Hamas, which New Zealand had designated as a terrorist organisation, remained in control of significant Palestinian territory, as the de facto government of the Gaza Strip, Luxon said.
"It continues to hold Israeli hostages, reject Israel's right to exist, renounce terrorism or agree to disarm."
New Zealand could not recognise a state where terrorists played a role in government, he said.
The government remained committed to New Zealand's "when, not if" approach in terms of recognising Palestinian statehood.
"With a war raging, Hamas remaining the de facto government of Gaza and no clarity on next steps, now is not the time."
The decision was not an endorsement of Israel's position and New Zealand opposed any actions by Israel to undermine the two state solution, he said.
"We expect Israel to enable unfettered humanitarian aid into Gaza, and to end all illegal settlement activity and current military action."
"We are united in our belief that the situation and suffering is truly catastrophic, and it must end."
The government has committed a further $10 million to international humanitarian partners to deliver emergency supplies into Gaza, bringing New Zealand's total contribution to $47.5m.
New Zealand was pro-peace, and neither pro-Palestine nor pro-Israel, but friends with both, he said.
"True peace starts with a ceasefire and that's the only way to end all of this suffering," Luxon said. "We want to see two states - Israel and Palestine - living in peace and security, and that will only happen through negotiation, dialogue, diplomacy and leadership."
Reasonable leadership was needed on both sides to come together and solve the conflict, but currently, there were extreme factions on both sides, he said.
Recognising a Palestinian state had "emboldened" Hamas and "frustrated" Israel.
"Both are actually being very intransigent and we're not actually getting closer to resolving the problem around a ceasefire."
The New Zealand government formed its own independent assessment of the situation, before coming to a decision.
"Some of our friends have pursued recognition and some haven't, and irrespective of their position, we form our own independent assessment and our own independent foreign policy, acting in New Zealand's interests."
New Zealand did not discuss the decision with the US nor any other country, he said.
Luxon acknowledged some New Zealanders would be disappointed by the government's decision, but others would support it, and there were strongly held views on both sides of the debate.
