Prime Minister Jacinda Ardern said New Zealand First putting the brakes on the plan to repeal the three strikes law is "simply democracy and MMP".
Justice Minister Andrew Little says he told the Prime Minister on Friday that he would have to pull the Cabinet proposal to get rid of the controversial law this year, after failing to get the support of New Zealand First.
Mr Little said he still hoped to persuade New Zealand First to support it.
He called the law the "high watermark of policy stupidity".
Mr Little said he had gone through a variety of hoops to get the repeal to Cabinet but New Zealand First had recently reconsidered their position.
"They got to the point where they said they could not support it at this time," he said.
Mr Little said New Zealand First had indicated they wanted to see a full package of reform rather than just isolated bits.
"It is what it is. This is the nature of politics," he said.
Watch Mr Little live on Morning Report:
Ms Ardern told Morning Report the idea is now off the table.
She said it could be reconsidered in three or four years time.
Ms Ardern said in the past eight months the coalition government had negotiated "significant issues" and this case was "simply democracy and MMP".
"Nothing's a done deal until it's gone to Cabinet," she said.
Watch Ms Ardern on Morning Report:
Ms Ardern said the government was still committed to a broader reform of the justice system but the three strikes repeal was not being entertained now.
With Winston Peters due to step into the acting prime minister role, new developments have occurred in his legal action over a superannuation leak.
Mr Peters is to sue two top public servants and National Party politicians over the leaking of details of his superannuation overpayment.
Papers were lodged in the High Court at Auckland yesterday seeking $400,000.
It was revealed during last year's election campaign that Mr Peters had been mistakenly overpaid superannuation for seven years.
When the error was discovered, he paid the money back, but it was later leaked to the media.
The claim is against the heads of the Ministry of Social Development and the State Services Commission, and the former National Party ministers Anne Tolley and Paula Bennett.
Ms Ardern said the case was a "private matter" and Mr Peters had taken the action as a private citizen before the election.
Ms Ardern said if there were any case of conflict of interest, Mr Peters would recuse himself.