Central Otago is the country's most scenic wine region, with the Cromwell basin home to the majority of its vines.
But, tourism growth is putting the squeeze on and developers are looking for innovative ways to satisfy the demand for accommodation.
The Wooing Tree Vineyard is prime winegrowing territory, opposite Cromwell's famous fruit sculpture.
The vineyard produces around 7000 cases of wine each year on land previously overrun by rabbits.
"We now have a 26 hectare site with 18 hectares of planted vines - primarily pinot noir but we also have some chardonnay on the side as well," vineyard co-owner Geoff Bews says.
While the business has grown, so has the town around it, creating huge demand for both visitor and residential accommodation, so the Wooing Tree owners want to shake things up.
They want to convert the vineyard into a "vineyard village," which would include over 200 apartments and homes, along with a commercial area and open spaces.
"We're trying to help the shortage of residential lots around Cromwell and build something that the town can be proud of and the community really wants to be a part of," Mr Bews told Newshub.
Central Otago Mayor Tim Cadogan says increasing the housing supply through large developments is positive.
"Anything that's going to put more houses on the ground in Cromwell is going to meet the demands that the huge growth in Central Otago has created," Mr Cadogan says.
But it's a controversial idea- the proposal would see more than three quarters of the vines pulled out to make room.
Mr Bews told Newshub it's about creating a wine tourism destination, and insists production will continue.
"So it's business as usual for us. Yes we are pulling a number of vines out, but on the other hand we're going to be buying or sourcing grapes from somewhere else in the Cromwell region," he says.
Wooing Tree will seek permission to rezone their vineyard to fit the new plans, and say they'll lodge those requests with council this month.