Prime Minister Bill English has announced that the Mt Albert by-election will take place on February 25, and National will not be standing a candidate.
Mr English says "we don't intend to participate in a by-election in the new year that is in a safe Labour seat."
"The National Government is focussed on winning the 2017 General Election later in the year."
Labour MP Jacinda Ardern said last week that she will be standing in the electorate.
It is currently held by David Shearer who is resigning from parliament to take up a role at the United Nations, triggering the by-election.
National's previous candidate for the electorate was MP Melissa Lee, who lost out to Mr Shearer while National won the party vote in the 2014 general election.
"The decision was made by the Prime Minister and the party that we will focus on the general election and I think that's fair enough and I agree with them", Ms Lee told Newshub.
She stressed that National would be standing a candidate in the general election, just not the by-election.
"Mt Albert is actually a Labour seat, it's never been anything but a Labour seat since the electorate began", she said.
Ms Lee added she is looking forward to the general election, and will "be doing everything I can to win the party vote in Mt Albert".
Labour Deputy Leader Annette King said Mr English's decision not to stand a candidate is "gutless" and he is "running scared from his first test as a leader".
"He clearly doesn't want another bloody nose after the Mt Roskill defeat".
Ms King also called on Mr English to announce an early election and "do everyone a favour".
"For tens of thousands of Kiwis a change of government can't come soon enough so let's save the cost of a by-election and bring forward the general election."
The Mt Albert seat was previously held by Helen Clark for 27 years and it has never been held by National since it was established in 1947.