The Government has decided there will not be dedicated Maori seats on the Auckland super-city council.
The Cabinet on Monday reconfirmed its decision that legislation on Auckland's governance, currently before a parliamentary select committee, will not provide for separate Maori seats.
The ACT Party and Maori Party have pledged their support of the National-led Government on issues of confidence and supply.
ACT leader and Local Government Minister Rodney Hide last week said he would resign his ministerial portfolios if legislation setting up the super-council provided for Maori seats.
Mr Hide and Maori Party leader Pita Sharples, who is also Minister of Maori Affairs, made representations at the Cabinet meeting.
The ministers have now been asked to work together to decide upon an effective way to ensure Maori representation at local government level.
Prime Minister John Key says the Cabinet believes it would have been inequitable to put in place Maori seats only in Auckland and not throughout New Zealand.
Mr Key says this decision is also consistent with the general view of the National Party.
He says Mr Hide's opposition to the seats was taken into consideration, but was not a dominant factor.
Battle for seats not over - Sharples
Dr Sharples says the battle for Maori seats on the super-council is not over.
He rejected Monday's decision and says the Maori Party will try to introduce seats through an amendment when the Auckland governance legislation is before the House.
Dr Sharples says the final decision lies with Parliament and the Maori Party will lobby National MPs to vote for the inclusion of Maori seats on the super-council.
Before the announcement, Dr Sharples said Maori would view it as a major rebuke if the Government rejected the idea of dedicated Maori seats.
Meanwhile, an iwi involved in a protest in May calling for Maori representation on the council says it is hugely disappointed.
Ngarimu Blair, from Auckland tribe Ngati Whatua o Orakei, told Checkpoint the fight is not over and there is potential for further protest.
"Unfortunately, we're just doing more of the same and we were hoping for a forward-looking Auckland - one that would reflect the diversity of cultures here.
"This system is just going to entrench what we have at the moment - and that is a council which is overly represented by middle class Pakeha."
Mr Blair said alternatives such as a statutory or advisory board or council committee would be toothless and a repeat of hopeless groups to represent Maori.
Hide 'acted on principle'
Mr Hide said on Monday he acted on principle and has not held the Government to ransom over the issue of Maori seats on the super-council.
An e-mail, circulated by National Party MP Tau Henare, claimed Mr Hide had made threats to split the Government over the issue.
Mr Hide said last week he would quit all his portfolios if the seats were approved but would not renege on the confidence and supply agreement with National.
The minister said he clearly outlined his position with Mr Key in June.
Mr Hide said the Prime Minister's office has apologised for the e-mail's release and its content.