Forty freight trains have been pulled off the line after asbestos was discovered in a resin on one of the locomotives.
KiwiRail said asbestos was found in a paint sample -- a soundproofing compound -- of one of the trains and it would now carry out urgent testing on the trains over the weekend to see if they were safe for staff to work in.
KiwiRail's chief executive Peter Reidy said staff had been informed of the situation and after testing was finished they would have a clearer picture of the situation.
''At this point we have yet to work through those details - our first and most important step is to confirm that our staff can continue to work safely with these locomotives, and that is what we are working through now.''
The DL locomotives were manufactured in China, the first 20 imported about four years and the other 20 last year.
KiwiRail said they had specifically stated in the contract with the manufacturers that asbestos and other toxic materials not be used.
After asbestos was found in Chinese-manufactured locomotives in Australia last year, the company sought and was given assurances that the locomotives were made without asbestos.
''We are clearly very disappointed with this situation and working closely with the manufacturers to understand how this could possibly have occurred.
''They have taken full responsibility for this and have undertaken to do whatever is necessary to rectify the situation as quickly as possible for us,'' Mr Reidy said.
A KiwiRail spokeswoman said it was too early to say how long the trains would be off the line and whether they would seek compensation from the manufacturers.
There would be some disruption to freight deliveries in the North Island over the weekend and it was working to inform those affected, she said.
Rail And Maritime Transport Union organiser Todd Valster said although it was disappointing KiwiRail had reacted appropriately by taking the DL locomotives out of service.
''It's a hell of a shock for us all, but the appropriate action is happening now. It's a huge inconvenience for everybody but it's a serious issue.''
Mr Valster said the union had urged KiwiRail to test the locomotives last year, and a couple had been checked but it wasn't until one of them was being stripped this week that they discovered white asbestos.
The union had contacted members to ensure they were informed, and would be supporting anyone who was concerned about it.
''There is asbestos in many applications, both domestic and industrial, and there's massive protocols for removing it. But you wouldn't expect it in a loco that's only a couple of years old. You wouldn't expect modern manufacturing to use it at all.''
- Fairfax Media