The Government will "significantly" increase access to publicly-funded mental health and addiction services and will establish a mental health commission.
However a suicide reduction target would not be implemented, as "every life matters, and one death by suicide is one death too many," according to Health Minister David Clark.
The laws relating to the compulsory assessment and treatment of mental health patients will also be repealed and replaced.
The Government has today released its response to the He Ara Oranga report into mental health and wellbeing.
Ministers have accepted, accepted in principal, or agreed to further consideration of 38 of the 40 of the report's recommendations.
Prime Minister Jacinda Ardern said this showed how seriously the Government was taking mental health and addiction.
The Government has agreed to "significantly increase" access to publicly funded mental health and addiction services for people with mild to moderate and moderate to severe mental health and addiction needs.
The Government did not provide any details on funding but that would be revealed in tomorrow's Budget.
Ardern said delivering on this recommendation around services to meet mild to moderate mental health and addiction needs "will be transformational".
"We will need to build entirely new services, train hundreds of new staff and build new facilities across Aotearoa," she said.
"All this will take significant and sustained investment. That begins with tomorrow's Wellbeing Budget but will take years."
The inquiry estimated that specialist services should cater to 20 per cent of the population who are estimated to have a mental health disorder each year.
This is more than five times the current system, which caters to 3.7 per cent of the population.
Drug and Alcohol Practitioners' Association executive director Sue Patton told The Heraldyesterday that the current model could only look at those with acute needs, leaving those with moderate needs to miss out.
"We do that really poorly in this country for people at the moderate end. There is a bigger group that certainly use substances in a risky fashion, and would benefit from intervention."
Ardern also accepted a recommendation to urgently complete the national suicide prevention strategy and to establish an independent commission to provide leadership and oversight of mental health and addiction.
The Mental Health, Compulsory Assessment and Treatment Act will be repealed and replaced, as recommended by the report.
Although the vast majority of the recommendation would be adopted, two were rejected.
The Government would not direct the State Services Commission to report on options for creating a 'locus of responsibility' for social wellbeing within Government.
It has also rejected setting a target of 20% reduction in suicide rates by 2030.
"While a number of countries have set targets and seen reductions in their suicide rates, meaningful reductions have been achieved in other countries without a target," the Government said in its rationale for rejecting the target.
But Clark said questions about a suicide target were considered at length.
He said the Ministry of Health is in the process of finalising a draft suicide prevention strategy and is working on options for an office of suicide prevention.
The Greens have welcomed the news; the party's mental health spokesperson, Chlöe Swarbrick said the Government's response to the report "lays the foundation for the much-needed transformation of crucial health services to New Zealanders".
NZ First health spokesperson Jenny Marcroft said the party was proud to deliver its promise on re-establishing the Mental Health Commission.
The Commission, along with many other recommendations made by the Inquiry into Mental Health and Addiction will save lives," Marcroft said.