Cabinet has agreed to go ahead with a Ministerial inquiry into the Fonterra botulism scare.
The discovery of contaminated whey protein concentrate earlier this month prompted recalls of products in New Zealand and overseas, including in China.
Primary Industries Minister Nathan Guy says the inquiry will be divided into two parts.
The first will look at how the potentially contaminated product entered the market.
The second part will look at regulatory and best practice requirements in the dairy industry, and the response from the Ministry for Primary Industries.
Mr Guy says the inquiry is an important step in reassuring trading partners that New Zealand takes these issues seriously.
Queen's Counsel Miriam Dean has been asked to chair the inquiry.