Corrections has filed an appeal of the High Court's decision that convicted murderer Phillip John Smith should be able to retain his hairpiece.
The toupée became a point of contention after Smith escaped prison in November 2014 and was subsequently confiscated when he was returned to jail.
But in March, the High Court ruled taking the toupée was against his right to "free expression" under the Bill of Rights Act.
As a result, Corrections has allowed him to keep the hairpiece under "certain conditions" while he's housed in Auckland Prison, and is filing an appeal in the Court of Appeal.
"Corrections has concerns about the precedent-setting nature of the High Court's decision and wide-ranging effect it could have on the Department's future administrative decision-making abilities," Auckland Prison Director Andy Langley said on Monday.
Smith said in court he felt "belittled, degraded and humiliated" after he was returned to custody and media ran pictures of him appearing bald.
He is serving a life sentence for the 1995 murder of the father of a 12-year-old boy he had been molesting.