David Seymour, the leader of ACT, a minor opposition party, came up with the idea after saying the law clashes with freedom of speech.
He said: "New Zealanders cherish the fact that we have strong separation between church and state," he told AFP on Wednesday.
"So when people discovered that there was a law that meant you could spend a year in jail for offending someone of a religious persuasion there was widespread condemnation."
Seymour said the government had agreed to the plan and New Zealand's blasphemy law is on track to be done away with by the end of May.
Seymour said the bid to repeal the law was triggered by the Stephen Fry blasphemy investigation.
The investigation into Fry's alleged blasphemous comments was dropped by Irish police on Tuesday because the remarks in question did not cause enough offense.
The probe came after a viewer complained about the comedian's comments during a 2015 interview on RTE in which he referred to God as "stupid" and "a maniac."
AFP reports lawmakers from the majority of political parties, including opposition Labour leader Andrew Little, all voiced support for repealing the law in New Zealand.
Anglican Archbishop Philip Richardson also backed the move, he told Fairfax New Zealand: "My view is, God's bigger than needing to be defended by the Crimes Act."
Blasphemy has been an offence since 1840 in New Zealand but no one has ever been convicted of the crime.
