Maori activist and former inmate Tame Iti says prisoners are more likely to have their underpants stolen than their taonga, and taking away the right to wear one is punishing Maori.
Pounamu and manaia taonga, or pendants, will be banned from prisons from the start of next week.
The Department of Corrections said pounamu and manaia are items of desire and value which can be illegally bartered in prison.
They said the items are often family heirlooms that can be lost in jail, and this latest policy will remove that risk.
But Mr Iti, a Tuhoe activist who served a jail term for firearms offences over the 2007 Uruwera raids, was against the move.
Mr Iti said it felt like a punishment for Maori prisoners. "If there's a hiccup in the system, they need to look at how they can prevent that from happening."
Corrections said pounamu was considered to represent freedom and traditionally given to people of high standing and, as such, was not appropriate as an item to be held in prison.
Prisoners who already have pounamu or manaia will be able to keep them until they are released. New prisoners will not be able to bring them into jail.
If an inmate is transferred to another prison, their taonga will be removed and sent to their whanau.
