A mandatory cautioning scheme would recognise that sending users to prison rather than treating them "can make the problem worse".
Under the proposal, a cannabis smoker would receive three warnings; the first two would include information on treatment, and on legal and health issues.
The third caution would require a user to attend an intervention session, and a fourth would result in prosecution.
Every warning would need the consent of the user, and failure to give it could result in prosecution. Such a scheme would not decriminalise cannabis, which would remain a Class C drug.
Associate Health Minister Peter Dunne, in response to the review, said adopting the scheme was "highly unlikely".
"The Government's over-arching view is we're not looking to change the legal status of cannabis. That has implications then obviously for the way in which you treat the substance and it's not an area we're likely to make any significant change in."
He said the Government rejected the argument that alcohol was, in some circumstances, more dangerous than cannabis, and therefore cannabis should be treated with softer hands.
Drug Foundation chief executive Ross Bell said the comments were a "huge disappointment". "The criminal justice response we've had for the last 36 years has been a failure."
He said the scheme was nothing to be afraid of.
"It's not in any way being soft on drugs, or sending a message that drugs are okay. What it does is recognise that the drug problem is a health issue and it's best to use whatever levers we have to shift people away from the court system towards health professionals.
"The commission's review is the most comprehensive, thoughtful and considered analysis of our obsolete drug law ... it's up to politicians led by the Government to talk to the public about dealing with the drug problem through a health lens."
The Government has already rejected the commission's recommendation for medicinal cannabis trials.
CANNABIS LAW
The Law Commission recommended a mandatory cautioning scheme, including "three strikes", before people caught with cannabis were prosecuted
The Drug Foundation says it is the best way to shift people from the justice system to the health sector.
The Government is almost certain to reject the proposal.