The Kermadec Ocean Sanctuary lies north of the mainland and includes a chain of islands and underwater volcanoes.
Prime Minister John Key made the announcement at the United Nations General Assembly in New York.
Fishing and mining will be banned in what Mr Key called “one of the most geographically and geologically diverse areas in the world.”
“New Zealanders value our coasts and oceans, which are an important part of our culture, economy and environment and we are committed to managing them sustainably,” he said in a statement.
The government is aiming to pass legislation to create the marine reserve next year.
The area to be protected is a vast 620,000 sq km (239,400 sq miles) stretch of the South Pacific, about 1,000km north-east of North Island.
It contains the 10-km deep Kermadec trench, one of the deepest ocean trenches in the world, and is rich in sealife including whales, dolphins, endangered turtles and sea birds.
Pew Environment Group, one of several groups which had lobbied for the creation of the reserve, said it effectively expands New Zealand’s protection of its marine environment from 0.5% to 15.5% of its marine spaces.
“It’s an extraordinary achievement for all New Zealanders and for the people of the Pacific Islands,” Pew’s campaign director Bronwen Golder told the BBC.