The drug ketamine -- known in some drug using circles as "Special K" or "Fantastic Ket" is set to be classed as a restricted class C drug.
Associate Health Minister Jim Anderton said the short-acting hallucinogenic anaesthetic will be a restricted substance after the classification is approved by Parliament.
It will mean increased controls on storage of the drug and increased penalties for its importation, possession, manufacture, or supply for illicit purposes.
Ketamine is used by veterinarians and in human surgery and palliative care.
Mr Anderton said ketamine will still be available as a prescription medicine.
The Expert Advisory Committee on Drugs has recommended the classification as it was considered it posed a moderate risk of causing potential harm.