About 4000 cattle worth up to $8 million will be slaughtered to halt the spread of the cattle disease Mycoplasma bovis.
The NZ Ministry for Primary Industries said it hoped to minimise the risk of the disease spreading from the seven known farms where it has been detected.
Five properties are owned by Aad and Wilma van Leeuwen, and are located in the South Canterbury/North Otago region.
A small number of cattle on the other two farms, which included a lifestyle block in Rangiora, had already been culled.
Mycoplasma is common globally in cattle but was discovered for the first time in New Zealand in July, prompting thousands of tests and raising questions about how it came into the country, which have not yet been answered.
MPI said the affected farmers can apply for compensation for verifiable losses relating to MPI exercising legal powers under the Biosecurity Act.
Some of the farmers are sharemilkers working on Van Leeuwen farms, among them immigrants.
MPI said it did not know exactly how many were affected but that they were being looked after and able to access welfare benefits if needed.
The move was welcomed by Federated Farmers, DairyNZ and Beef+Lamb NZ.
Labour Primary Industries spokesman Damien O'Connor attacked the National Government over its slow response.
"It was inevitable and arguably too late, but political considerations overruled biosecurity. The image of cows being slaughtered just before the election was something National didn't want to be seen," O'Connor said.
Federated Farmers president Katie Milne said the decision to destroy the stock was the only option which would ensure peace of mind for the rest of New Zealand's dairy and beef farmers.
"We recognise the disease has come at a significant emotional cost to the affected farming families and their animals. The process of culling whole herds will be very stressful for the people concerned."
MPI's director of response, Geoff Gwyn said since late July it had carried out tens of thousands of tests of the infected, neighbouring and trace properties as well as district-wide testing in Waimate and Waitaki, and nationwide testing of bulk milk.
"The only positive results for the disease have been on seven infected properties, leading us to be cautiously optimistic that we are dealing with a very localised area of infection around Oamaru," Gwyn said.
The operation to slaughter the 4000 cattle would not happen immediately and would be a "big logistical exercise". The farms would then be de-contaminated and "re-populated".
The precise value of the cattle is difficult to determine because they are a mixture of dairy cows (worth over $2000 each), bulls, heifers and calves.
Mr Gwyn raised the possibility that more cattle might have to be killed if further tests revealed more infection on other Van Leeuwen farms.
"Currently there is no need to remove animals from other farms in the Van Leeuwen group that are under restrictions," he said.
"Testing of animals on those farms continues and should infection be found, they will be subject to the same measures."
All premises, transportation vehicles and equipment involved in culling would follow a strict decontamination and disinfection protocol to mitigate the risk of spreading the disease.
Once de-population is completed, there will be at least a 60-day stand-down period where no cattle will be permitted on the farms. During this time the infected properties will be cleaned and disinfected.