New Zealand First says it will "vigorously oppose" any move to list Fonterra on the stock exchange.
The dairy giant's board will outline its favoured option for a capital restructure to its farmer shareholders on Thursday.
It has kept that option under wraps, but there is speculation it could involve listing part of the company on the stock exchange in a bid to raise cash to boost operations in other countries.
NZ First MP Doug Woolerton today said that listing Fonterra would open the door to foreign ownership and would be "the worst possible option for dairy farmers" and provincial communities.
"Big multinationals are dying to get their hands on Fonterra. Once they own the dairy industry they will start buying farms to guarantee their supply and then, of course, start moving processing to China.
"It would mean short-term financial gain, followed by a big dose of financial pain."
Mr Woolerton said Fonterra operated under special legislation that gave it a partial monopoly.
NZ First would seek to have that legislation overturned if Fonterra listed on the stock exchange.
Fonterra has said it will not be discussing the outcome of its capital structure review until the ideas are first put to its farmer-shareholders on Thursday.
Fonterra chief executive Andrew Ferrier said in his latest annual report that if the company was to take advantage of opportunities in the global market, its investment strategy could not stay tied to the amount of milk produced in New Zealand.
"More money will come in the door as production increases, but not at the pace or amount we need to lock down the much bigger growth opportunities over the next few years.
"Strategy and capital structure go hand-in-hand".
So far, Fonterra had made overseas investments without changing its capital structure, but these investments represented only a small part of Fonterra's total value.
Three-quarters of the company's value was in New Zealand, 10 per cent in Australia and the rest was scattered around the world.
Do you think New Zealand should open the door to genetic modification in agriculture?Related story: GM in NZ on farming leaders' agenda