The Drug Foundation is welcoming what it calls Labour and the Greens' fresh approach to tackling the country's drug problems.
New Zealand will have a referendum on legalising marijuana for personal use as part of the Greens deal with Labour.
Under the deal, drug use will be treated as a health issue and there will be an increase in drug and alcohol treatment funding.
Drug Foundation executive director Ross Bell said that approach was long overdue.
"One of our frustrations with the National government was its reluctance to look at things like medical cannabis and decriminalisation," he said.
"When it put money into treatment, it never put enough money into it. When it came to the meth problem it gave a lot of resources to police but not enough to education, prevention and treatment," he said.
"So we're excited by the many opportunities there are now with a Labour, Green and New Zealand First government to treat our drug problem the right way, to treat it as health issue, to take the right approach."
He said treatment for drug abuse had been heavily underfunded, and an estimated additional $150 million a year needed to go into the sector.
Aotearoa Legalise Cannabis Party member Michael Appleby also welcomed the referendum. He believed many New Zealanders wanted to see cannabis legalised for those over 18, and regulated by the government in a similar way to tobacco or alcohol.
"[If it was legalised] people will no longer be looking over their shoulders," he said.
"The majority of adults who use cannabis responsibly will no longer have to worry about losing their jobs or not being able to travel and the doctors who will be able to prescribe medical cannabis."
Lobby group Family First said legalising cannabis could put New Zealanders' health at risk, however.
Its national director Bob McCoskrie said he was against the move and there were too many health risks from marijuana, including its effects on cognitive ability.
"It just seems highly ironic that we're starting to finally realise the harms of tobacco and trying to do everything we can to discourage it, and here are believing in the myth that marijuana is harmless."