Education Minister Nikki Kaye has confirmed the Government will scrap the school decile system, which she says is "stigmatising" schools.
The system will be replaced with a "risk index" which Ms Kaye says will allow for funding to be better targeted at schools.
Newshub revealed in April the system would be replaced, which Ms Kaye confirmed on Monday.
The risk index, Ms Kaye says, will allow the Government to better target funding to schools with children and young people most at risk of not achieving due to disadvantage.
"Rather than allocating this funding on the basis of neighbourhood characteristics as the current decile system does, the risk index will instead provide fairer funding that better reflects the needs of children in our schools and services," Ms Kaye said in a statement on Monday.
"This will mean extra resources are better targeted to support schools to lift achievement."
The Primary School Teachers Union said in April it was worried a more targeted approach could shift the stigma from schools onto students.
"In the past we've had stigmatising of low decile schools, will that mean that individual children will be stigmatised?" NZ Educational Institute President Lynda Stuart told Newshub.
Another concern was that while some schools could gain funding, others will lose it. But Ms Kaye says no school will see a reduction in funding as a result of the change.
"In fact, we expect some will gain significantly."
The indicators used for the risk index are yet to be finalised, Ms Kaye says.