ACT claims the Prime Minister's opening move in her handling of the Ihumātao land dispute sends the wrong message.
Jacinda Ardern has promised construction at the south Auckland site will be put on ice while discussions take place between protesters, the local iwi and Fletcher, which wants to build 480 houses on the land.
ACT leader David Seymour thinks Ardern has made a dangerous call.
"By stopping development at Ihumātao, the Prime Minister has said if you break the law and illegally occupy other people's private property, the Government won't punish you - it'll actually help you."
Thousands more protestors packed into the site on Satuday, many having camped overnight. Fletcher, which actually struck a deal with the iwi to build the homes, has sent the protesters eviction notices.
Seymour says Ardern's interference is legitimising unlawful behaviour.
"If the Prime Minister is going to have any intervention, it should be upholding property rights and the rule of law - not emboldening people who break the law and occupy other people's property."
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He says her actions will have huge ramifications for every iwi settlement.
"It means even if you have private property, if other people don't like it they can occupy your land and stop you using it."
Seymour's words echo those of Government minister Peeni Henare, who told Newshub Nation on Saturday there's a risk the wrong move - such as buying the land back from Fletcher - could "undermine every Treaty settlement that's been done to date".
"We then allow relitigation of settlements that have been done in the past and are we prepared for that? I'll leave that question there."
He didn't rule out that as a possibility, however.
Henare said Fletcher had done everything right from a legal perspective, but it would difficult to undo "the original sin of land confiscation in the 1860s".
The iwi, Te Kawerau a Maki, originally tried to stop the family which had possesion the land from selling it to Fletcher a few years ago, "but had no legal recourse to stop the transaction", said chairman Te Warena Taua.
"We decided the next best thing was to negotiate with Fletcher to win significant rights and concessions for our people."
The iwi condemned protesters - which now include Green MPs - saying they were using the standoff to "rewrite history for their own purposes".
There have been no arrests at the site since Wednesday.
"Police are pleased with behaviour at the Ihumātao protest today with a generally relaxed atmosphere so far," said Supt Jill Rogers.