The Environmental Protection Authority wants a proposal for a new men's prison in South Auckland to go before a board of inquiry.
The Government is seeking expressions of interest from the private sector to design, construct and run the 1000-bed men's prison in Wiri, which will be built as a public-private partnership.
Some locals fear a second jail will mean the area is labelled the country's crime capital.
In its application, the Department of Corrections asked that the project be referred to a board of inquiry so all parties can air their views.
The Environmental Protection Authority has now agreed, saying an inquiry would offer expertise in land use planning, social impacts, transport planning and community understanding.
It also deems the project nationally significant, because of the rising prison muster.
Environment Minister Nick Smith must now consult Cabinet before a decision is made.