That news prompted serving and former soldiers at the time to vent online.
"It is a highly overrated assault rifle and if given the choice, I would rather throw stones at the enemy than carry that stoppage prone piece of crap," one ex-soldier wrote on The Firearm Blog.
Another serving New Zealand Army member agreed: "The accuracy on my issued rifle was terrible ... I'd have been lucky to hit the side of a barn."
On Tuesday Defence Minister Jonathan Coleman confirmed the Government has granted approval for replacement guns.
"It is important NZDF personnel are well equipped and have effective modern rifles suited to today's operational environment," says Dr Coleman.
"Weapon technology has advanced considerably since the NZDF purchased the Steyr rifle in 1987."
The Ministry of Defence is now conducting a competitive tender process to purchase 8,800 "off the shelf" replacement rifles and associated accessories.
The Defence Force will trial short-listed weapons before a recommendation will be made to Cabinet early next year. The new rifle is expected to be introduced into service by 2016-17.
Firearms and military online forums were abuzz with chatter about the move. Some enthusiasts wondered whether they could buy one of the discontinued guns from the army.
An accepted rate seemed to around $500.
However, one poster calling themselves 'Kiwi Shooter' said: "NZDF have always destroyed old gear rather than sell to civilians."
Asked this week what the Defence Force planned to do with the guns, a spokesman said it was looking at "most efficient and cost-effective way" to dispose of the Steyrs.
"As part of this project, all feasible options for the disposal of the Steyr fleet will be considered," the spokesman said.
"On-sale to any party is unlikely, although this will be assessed in more detail once the disposal project is initiated."
The Defence Force is also wanting to buy new light machine guns, combat shotguns, sniper rifles, pistols, and grenade launchers.
