A decision over the future of Waikeria prison will be made over the coming weeks, Prime Minister Jacinda Ardern says.
The government has scrapped plans to build a new 3000-bed mega-prison at Waikeria in rural Waikato, but it has yet to decide what to do instead.
The decision would go to Cabinet, Ms Ardern said.
New Zealand is grappling with a ballooning prison population. The prison muster is just under 11,000 - nearly double the number of 20 years ago.
Ms Ardern told Morning Report that Corrections had informed her this morning that there was an "additional capacity" for about 400 prisoners in the prison network - though that number would fluctuate day to day.
- Jacinda Ardern says the government doesn't favour mega-prisons
The government was also adding an extra 1500 beds by the end of 2019.
Ms Ardern said the government had consistently said it did not want a mega-prison, but it had a "facility issue" with Waikeria.
"At the same time, we have a very old prison that we are having to look at what we do if we're making sure that we have prisons that are fit for purpose and rehabilitation."
She said a decision over the prison's future would be made "over the coming weeks".
Meanwhile, justice campaigners say mega-prisons are not the answer to New Zealand's bulging prison population.
A former senior prison manager and reform advocate Kim Workman told Morning Report small prisons were much better.
- Kim Workman