The number of people out of work has risen as the pace of job growth did not keep pace with the growing labour force.
Official figures show the unemployment rate rose to a seasonally adjusted 4.3 percent in the three months ended December from a revised 4 percent in the previous quarter, which was the lowest in 10 years.
The numbers are often volatile and revised, and the correction from the previous quarter was expected.
"The employment rate is now back in line with rates between the September 2017 and June 2018 quarters," Stats NZ senior manager Jason Attewell said.
The number looking for work or underemployed rose by 10,000 to 120,000, while the economy created only 2,000 jobs in the quarter, with a notable dip in the number of part time jobs. The proportion of the workforce in employment still remained near record highs.
The number of men becoming unemployed outpaced the number of women, and unemployment rate for women of 4.2 percent was lower than males at 4.4 percent for the first time in more than eight years.
The strongest job growth was in the construction, education and training, and retail sectors.
The underutilisation rate, which measures the number of people working who are seeking more hours and is an indicator of slack in the market, rose to 12.1 percent.
Wage growth remained subdued, rising 2 percent, which reflected in part big rises for nurses and rest home workers.
ANZ senior economist Liz Kendall said the labour market was stretched but the peak may have gone, which would back the Reserve Bank's policy to keep interest rates on hold for the foreseeable future. The central bank has a mandate to support maximum employment.
"Today's data could add to a more cautious tone from the RBNZ next week, even if their central forecasts do not change significantly."
The New Zealand dollar fell about half a cent after the data, as investors factored in a greater risk of a interest rates being cut.