The minister tabled an amendment to the Animal Welfare Amendment Bill which would make it illegal for manufacturers to test ingredients or finished products on animals.
Green MP Mojo Mathers had already tabled a similar amendment, but the minister said there were concerns it was too broad and could capture pharmaceuticals.
"This could lead to unintended consequences such as banning testing on ingredients in medicines that New Zealanders depend on," Mr Guy said.
Ms Mathers said yesterday she was "over the moon" that her hard work had been recognised.
Mr Guy thanked Ms Mathers for her work on the issue.
"Although the Government has introduced a slightly alternative wording, this amendment still captures the principle of her [amendment]," he said.
It is the second time the National-led Government has bowed to pressure on animal testing.
The issue gained traction during the debate on legalising synthetic drugs last year. In that case, the Government eventually agreed to outlaw the testing of party pills and synthetic marijuana on animals after widespread public opposition.
The extent of testing cosmetics on animals in New Zealand was difficult to measure because companies were not required to put this information on their labels. The practice was believed to be rare or non-existent because it would fail to pass a benefit-harm threshold.
Animal right activists will now set their sights on securing a ban on foreign cosmetics which had been tested on animals.
Several jurisdictions including the EU, Israel and India have already taken this step.
Cosmetic changes
• The Government will ban the testing of cosmetics on animals.
• The ban was unlikely to lead to products being stripped from shelves in New Zealand.
• About 90 per cent of cosmetic products sold in New Zealand were made overseas.
• The Government's new ban would not affect imports.
