An expert group, which includes Wellington Zoo, says the emperor penguin, nicknamed Happy Feet, should be released in the Southern Ocean.
The bird became ill after eating sticks and sand since arriving from Antarctica.
It turned up on Peka Peka beach on the Kapiti Coast last week, thousands of kilometres from its home.
It has since undergone three operations at Wellington Zoo, and could spend months there before it is well enough to be moved.
But the Department of Conservation, Te Papa, Massey University and the Zoo on Wednesday said the penguin should be released to the ocean south-east of New Zealand.
"The reason for not returning the penguin directly to Antarctica is that emperor penguins of this age are usually found north of Antarctica on pack ice and in the open ocean," says DOC biodiversity spokesperson Peter Simpson.
Costs, logistics and practicalities of the move have not yet been worked out.
Happy Feet is in a stable condition and is continuing to pass sand naturally. It will be X-rayed on Friday or Saturday.