The government spy agency says it's aware of international reports some Chinese-made cellphones are censoring content.
Lithuania's Defence Ministry has recommended consumers avoid Xiaomi phones due to a feature it says censors terms to do with Taiwan, Tibet or democracy.
Xiaomi, one of the world's largest phone makers, denies this.
The Government Communications Security Bureau said it was aware of the "international commentary".
It did not specify what equipment state agencies could use but did require them to run risk assessments, the GCSB said in a statement to RNZ.
The agency has not said if it knows of any agencies having done such an assessment on Xiaomi phones.
A Xiaomi spokesperson told RNZ its devices "do not censor communications to or from its users".
"Xiaomi has never and will never restrict or block any personal behaviours of our smartphones users, such as searching, calling, web browsing or the use of third-party communication software.
"Xiaomi fully respects and protects the legal rights of all users. Xiaomi complies with the European Union's General Data Protection Regulation (GDPR)."
Lithuania has strained diplomatic relations with China at present.
The GCSB administers the network security provisions of the Telecommunications Interception Capability and Security Act (TICSA). The act was "country and vendor agnostic", the agency said.
TICSA covers security risks in the telecommunications networks but does not extend to end-user devices such as cellphones.
Xiaomi markets its phones as cheaper than its rivals, and has experienced huge growth; in July it leapfrogged Apple to become the second biggest cellphone seller worldwide behind Samsung.
It has been under fire before over its phones and cameras.
Last year, a cyber security researcher claimed his smartphone was watching much of what he was doing - including recording all his searches and queries and views, even in private "incognito" mode - and sending the data to remote servers hosted by Chinese tech giant Alibaba.
The company rejected these claims.
The claims echo controversy around Chinese tech giant Huawei, which the US has put sanctions on based on claims of security risks.