A Muslim community leader has likened the government's gifting of an abattoir to Saudi Arabia to lavishing goods on Hitler or Saddam Hussein.
The Saudi government has just executed 47 people, including some of its political opponents.
But Prime Minister John Key said while the killings were deeply concerning, the abattoir was still going to the kingdom.
The government was expected to spend more than $3 million on the abattoir, which would be built on a Saudi businessman's farm in the Saudi desert.
The abattoir was part of a controversial deal struck by Foreign Minister Murray McCully to placate the businessman, who was blocking a free trade deal with the Gulf States.
Documents released by Mr McCully said private ownership of slaughterhouses was forbidden in Saudi Arabia, so the abattoir would be a gift to the Saudi government - which would then lease the abattoir back to the businessman.
News of the gift shocked a Shia cleric and community leader in Auckland, Mohamed Al-Modarresi, who was still mourning the death of one of those executed.
Mr Al-Modarresi said it looked like the New Zealand government was rewarding mass murder with a gift.
"How about giving gifts and making a memorial service for Hitler, or doing that for Saddam Hussein or Stalin, would that be fine with us?
"I think that is the same now as giving gifts to the Saudi government and King Salman."
Mr Al-Modarresi said New Zealanders would look back on the gift with shame.
"I think we, my kids, maybe me, will look back into this dark time of our country now saying our government, our elected government, gave gifts and made deals with these tyrants who have never had any moral values for humankind and human rights."
'A shambles and a disaster'
New Zealand First leader Winston Peters said it was time the government showed some moral leadership.
"The government can't justify what they're doing - it's been a shambles and a disaster from start to finish including the loss of all those sheep - and now they're going to go ahead regardless of how they have behaved," Mr Peters said.
"Now frankly this is something a lot of people with Middle Eastern backgrounds oppose as well, they don't want it to go on.
"So the government should show some leadership and some values and some principles and not behave in this way."
Green Party co-leader James Shaw said the government's Saudi sheep deal had been a debacle from the start, and he thought the public would find the gift grotesque.
"From what I saw of the media reports at the time that Saudi [Arabia] executed those people... is that the vast majority of New Zealanders were appalled by that.
"And I think that they would also be appalled by the idea that our government is giving their government money for nothing."
As part of the deal, Mr McCully also gave the businessman $4 million in cash.
Nine hundred heavily pregnant sheep were also flown from New Zealand to the desert farm and nearly all their lambs died upon arrival.
Mr McCully's deal is being investigated by the Auditor-General.