Shark cage tourism operators are to be regulated to address concerns the practice is encouraging great white sharks to attack divers in Foveaux Strait.
Divers are worried the practice of sending out bait from boats to attract the predators is changing their behaviour and encouraging them to hunt for food around divers' boats.
About 100 Great Whites travel to the Foveaux Strait area each year between December and June to feed off a large colony of fur seals and viewing them underwater has become a major tourist attraction.
Conservation Minister Nick Smith announced on Friday that operators would require permits to ensure the practice was carried out safely and did not change the behaviour of the sharks.
There are also concerns shark cages endanger the threatened species.
The Department of Conservation will be writing to the shark cage tourism operators notifying them of the requirement to have a permit under the Wildlife Act.
The department will also be consulting the Stewart Island community on the details of permit conditions to ensure the tourism operators do not change the behaviour nor harm the great white sharks.
Dr Smith said the issue over great white sharks was causing tension within the Stewart Island community between those supporting tourism operators and those concerned about risks to divers and others from shark attacks.
He said there had been reports of people deliberately killing great whites even though they are a protected species.
Dr Smith said the solution lay in tightening the rules around shark tourism operators and taking a firm approach against anybody deliberately killing the sharks.
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Ban will put shark cage tourism out of business - operator
But a shark diving operator says if businesses like his are banned from using bait, tourists excursions will become a pointless exercise.
Mike Haines who runs Shark Experience in Bluff, says while they use bait to attract sharks to the cages, they don't feed them.
He says there are more sharks in the water, which is why divers are seeing them more often, not because they are expecting to be fed.
Mr Haines says cage tourism will go out of business if operators can't use bait or burley.
Listen to Mike Haines