The charity behind Ronald McDonald House is "perplexed" by Middlemore Hospital's decision to turn down one of the houses for families of its young patients.
Counties Manukau District Health Board said it had considered the offer from Ronald McDonald House Charities carefully "as proposals of this nature can be very divisive with staff and public alike".
"On balance, we decided to take the advice of our public health team of doctors and to respectfully decline taking discussions further."
There are already three Ronald McDonald Houses in New Zealand, including one that serves Starship Hospital, which provide accommodation for families whose children are in hospital.
The DHB thanked the charity for its offer.
Charity chief executive Wayne Howett said he'd had no direct communication with the DHB, but the decision appeared to be based on the charity's link to the fast food company McDonald's.
About 25 percent of the charity's funding comes from the fast food company, and it also takes its name from the cartoon clown used to advertise the brand to children.
Mr Howett said he was perplexed by the DHB decision not to take discussions any further than the very early stages.
"We went to canvas all the DHBs to determine from a national point of view, what's the best strategic planned growth that will meet the needs of families around the country, so we entered into discussions with DHBs all around the country."
All the other DHBs had been interested in talking to the charity and had been comfortable with how its relationship with McDonald's worked.
"There are already two programmes that have been funded by Ronald McDonald House Charities in the Counties Manukau area so this decision seems to be at odds even with that, let alone the other DHBs throughout New Zealand," Mr Howett said.
The charity's programme at Auckland City Hospital had been running for 23 years and had grown from 10 to 97 rooms in that time, he said.
However, the DHB's decision has been applauded by public health specialists.
Auckland University health professor Boyd Swinburn said the Ronald McDonald Houses do provide a good service, but hospitals are obligated to lead the way when it comes to healthy images.
"There is a risk for a hospital housing that brand, which is associated with fast food," he said.
"The DHB made the right decision, listened to the public health physicians, and took the totality of the issue into account - not just the dollars."
Otago University associate professor of public health Louise Signal said New Zealand had the third highest rate of obesity in the OECD for children and adults, and rates had increased significantly over the past decade.
"We know that fast food is a major contributing factor and it sends the wrong message to children to link McDonald's to health."