He said New Zealand could "relatively easily" move to a similar method in which Kiwis possessing less than seven days worth of class C drugs could avoid prosecution by going to treatment.
But this still would not solve the toxic environment in which gangs held the power in the drug trade, he said.
"I think there's a public appetite for getting drugs out of control of the gangs."
It's my role, given my responsibility, to have some place in leading that debate, and I'm prepared to take it on.
One way to tackle that would be a move that would still be "some years away", where the country could switch to class C drugs being regulated under the Psychoactive Substances Act.
This would mean each drug would need to go through testing to prove it was low risk, and could then be sold in stores by licenced people deemed by the government to be "fit and proper" to sell the drug.
"They would have to be legitimate," Dunne said.
"[People] would be able to purchase the product in the same way that someone goes and buys alcohol in a shop now.
"Anything that was illegally produced or not produced from an approved manufacturer would still be illegal. You couldn't grow your own in the back yard."
So how far away could a change to the drug laws be?
Dunne said the Misuse of Drugs Act is due for review sometime in the next few years, and he intended to push his ideas, which he has been talking about openly since 2013.
Moving to a Portuguese-type situation could happen "relatively quickly" but government would first need to "significantly invest" in more drug treatment services to treat people who were referred.
"The bottom line is you need treatment facilities that can cope," he said.
The first change New Zealand would be likely to see would be resources currently devoted to policing around drugs switch to treating drug users.
"One point everyone agrees on . . . is the current law doesn't really work that well."
A change was "going to take some political will".
We should be willing to learn from the successes of other countries. I think Portugal is one of the shining lights in this respect.
"It's my role, given my responsibility, to have some place in leading that debate, and I'm prepared to take it on."
Dunne said change appeared to be "inevitable".
"It will happen, but it won't happen overnight."
Drug Foundation executive director Ross Bell supported the suggested moves, but said being an election year the onus is now on National and Labour to start talking about drug law reform.
He said the two parties should "prove to us why they think the status quo is protecting young New Zealanders".
He said a number of other politicians and parties had spoken about drug law reform in the past month and he had seen no public backlash against them, so questioned why National and Labour had been silent.
"The current law isn't working, it hasn't worked for a long time . . . we should be willing to learn from the successes of other countries. I think Portugal is one of the shining lights in this respect."
Portugal changed its approach in 2001 and has since seen drastic reductions in youth drug use, drug overdoses, HIV infections and prison populations, Bell said.
The Drug Foundation also supported moving to regulate certain drugs under the Psychoactive Substances Act, which Bell called "a very good model of cautious drug law reform".
"It certainly isn't the heavily commercialised models of legalisation that you see in some state of the US, it's a very public health focused law."
Bell hoped the move would keep drugs out of the hands of children, and raise the age when people started using drugs.
