The new ministry will replace the government's Child, Youth and Family (CYF) Agency from April 2017 as the country struggles to deal with perceptions that the state is failing to provide at-risk children with a better future, Xinhua news agency reported.
"The new ministry will put the needs of children first so that they have the best possible chance of living happy and successful lives," Prime Minister John Key said.
Social Development Minister Anne Tolley, who will be appointed as Minister for Vulnerable Children, said the new ministry, new name and completely new operating model reflected the determination to remain "absolutely focused on the individual needs of each child".
"The long-term outcomes for young people in the current system are simply atrocious," said Tolley.
The new ministry would focus on five core services: prevention, intensive intervention, care support services, transition support, and a youth justice service aimed at preventing offending and reoffending.
However, critics said the very name of the ministry treated vulnerable children as a problem rather than looking at their potential.
"It will stigmatise the children who it is aiming to help and scare families who are trying to do the best for their kids," Glen Barclay, National Secretary for the Public Service Association Union said.
