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Parliament passed the Suppression of Rebellion Act, which allowed for the introduction of martial law, and the New Zealand Settlements Act which authorised the taking of land from Māori. The intention of the Act was to punish "rebel" Māori by allowing the confiscation of their lands. However, the Act's title disguised this by portraying it as a measure to assist European settlement, particularly by placing military settlers on lands as a type of buffer between Māori and European settlements. Māori considered to be in rebellion were not entitled to compensation, and even "loyal" Māori were first offered monetary compensation rather than the return of their land. Later, the law was amended to allow awards of land, including small areas to surrendered "rebels".

As the imperial government was losing enthusiasm for paying for the thousands of men fighting in New Zealand, the Weld Ministry pushed a policy of colonial "self-reliance" in dealing with Māori so that the settlers could handle matters as they saw fit. Despite many reservations about this, the point was largely conceded by the imperial authorities, and in a rapid series of steps in 1864-65, the Governor lost the power to control Māori affairs. Grey managed to retain some imperial troops for several years, but after mid-1865, they were restricted to garrison duties.

The first proclamation confiscating land under the New Zealand Settlements Act was made in December 1864. In all, five districts were proclaimed to be under the Act over the next three years: Taranaki, Waikato, Tauranga, Eastern Bay of Plenty, and Mōhaka-Waikare. The area affected was about 1.5 million acres. A "Compensation Court" (mostly comprising judges of the Native Land Court) was set up to hear claims by "loyal" Māori for monetary compensation or to recover their land.

On 11 May the sailing ship Fiery Star caught fire and sank south of Cuvier Island, off the Coromandel Peninsula, with the loss of 79 lives.

In 1865, the Kingitanga leaders effected a ceasefire in the Waikato and the British Government announced that it would begin to withdraw its forces from New Zealand. In an effort to try to secure peace, successive settler governments passed laws that were intended to give practical effect to some of the promises implied in the Treaty. These included:

Until 1865, the government tended to treat Māori who were captured in battle as prisoners of war. In 1865, with the rise of the Pai Mārire movement, it also arrested people whom it thought were aiding the "rebels". Te Kooti Rikirangi of Poverty Bay was one of these. He was sent with some 300 others to the Chatham Islands. Te Kooti's pleas for a trial were ignored. On 4 July 1868, Te Kooti and many followers escaped from the Chathams and were pursued on the East Coast and in the Urewera and the Taupō districts. He founded the Ringatū church and provided it with rituals and structures that last to this day. From 1868, the government began to charge particular individuals with crimes such as murder or treason, but Te Kooti escaped the pursuing forces (over some four years) and was eventually pardoned in 1883.

Wellington was New Zealand's third capital. The first was Okiato in the Bay of Islands. However, Governor Hobson considered it to be too far from the rest of the colony and inappropriately sited, being within the territory of the dominant Ngā Puhi. The next choice was Auckland, with its large harbour, access to the western coast and absence of substantial Māori settlements, and the capital was re-established there by September 1840.

On 14 May 1866 the General Grant, sailing from Melbourne to London, hit cliffs on the west coast of the main island in the Auckland Islands and sank.

Following the Māori Representation Act 1867, and while Titokowaru and Te Kooti still led violent resistance, the first four Māori members were elected to parliament. Under this statute, adult Māori men were given universal suffrage (voting rights) – 11 years before Pākehā men, who still faced property qualifications. However, there were only four Māori seats, at a time when Māori should have had many more, based on their population. Only in the 1890s did Māori begin to achieve significant influence in parliament, first through James Carroll (member for Eastern Māori and then Gisborne), then through younger activists such as Apirana Ngata, Hone Heke Ngapua, Peter Buck and Maui Pomare. The number of Māori seats remained constant at four until the first MMP election in 1996. Since then, they have increased by one seat per election (reflecting the increasing numbers of voters on the Māori roll).

In 1868, Ngāti Ruanui leader Titokowaru led a strong resistance to land confiscation in south Taranaki. His force, persuading and coercing neighbouring tribes to join in, swept south from the Hawera district, inflicting several heavy defeats on the colonial forces and finally threatening Wanganui itself. In November, for some reason now unclear, Titikowaru's army then largely deserted him, literally overnight, and he became a fugitive, hunted back into the inaccessible upper Waitara area. He was later involved in the Parihaka passive resistance movement.