That approach will also be extended to users of all illegal drugs, but Clark and Nash denied it was "decriminalisation by stealth".
Nash said 52 people had died this year alone from using synthetics, which are often laced with poisonous chemicals.
"Under current laws synthetics and other dangerous drugs are killing people and fuelling crime while dealers and manufacturers get rich. The current approach is failing to keep Kiwis safe and can't be continued," Clark said.
"It's time to do what will work. We need to go harder on the manufacturers of dangerous drugs like synthetics, and treat the use of drugs as a health issue by removing barriers to people seeking help."
The measures announced today are:
• Reclassifying the two main ingredients found in synthetics linked to recent deaths - AMB Fubinaca and 5FABD - as class A drugs
• Creating a temporary C1 classification for new and emerging drugs to give police greater search and seizure powers
• Toughening penalties to up to life imprisonment for suppliers and manufacturers of drugs that include the AMB Fubinaca and 5FABD compounds
• Amending the Misuse of Drugs Act to specify in law that police should use discretion and not prosecute for possession and personal use where a therapeutic approach would be more beneficial, or there is no public interest in a prosecution. That will apply to all illegal drugs
• Allocating $16.6 million to boost community addiction treatment services, and provide communities with the support to provide emergency "surge" responses, when there are events such as a spate of overdoses or deaths
Clark said the moves did not mean a full decriminalisation of drugs as recommended by the recently released report of the Mental Health and Addiction Inquiry.
"These are immediate steps we can take in response to the challenge we face with synthetics. We are considering the inquiry's recommendations separately," he said.
Nash said the misuse of drugs was still illegal and people should not be complacent about getting caught.
"Whether a drug user ends up getting police diversion, goes through an alternative resolution process, or is referred for health treatment, they will still come to the notice of police," Nash said.
"However, police currently use their discretion when it comes to drug users who are suffering from addiction or mental health problems.
"I expect police will continue to prosecute people for possession when appropriate under the guidelines announced today. We are striking a balance between discouraging drug use and recognising that many people using drugs need support from the health system, or education about harm reduction. We don't want our jails full of people with addiction problems, we want those people getting treatment."
Of the additional $16.6m allocated for addiction treatment services, $8.6m over four years has been set aside, available immediately, for an acute drug harm response discretionary fund.
Up to a further $8m over two years from the proceeds of crime will be used to establish a drug early warning system to provide intelligence and data to support the discretionary fund; develop and deliver "Addiction 101" training in communities suffering harm from synthetic drugs; and fund other Ministry of Health drug and alcohol initiatives.
Green Party drug law reform spokeswoman Chlöe Swarbrick said it was an evidence-based approach to reduce drug harm, demand and supply.
"We know that when we take people down the criminal pathway we do nothing to reduce drug use or demand. Instead we increase the harm to those with addiction problems and to communities. We also increase gang control and associated criminality," she said.
New Zealand Drug Foundation executive director Ross Bell said he was pleased the Government was willing to explore new and compassionate ways to address what was a public health emergency.
"The terrible deaths our families and communities have suffered tragically prove our drug laws are not fit for purpose: Too much emphasis has been given to law enforcement and prisons, with little support to communities for prevention, harm reduction, treatment and social intervention.
"Of course, it is right to target those people at the high end who traffick and manufacture these dangerous substances. But if we aren't willing to address the health and wider social issues that drive drug harm, we will continue to repeat past mistakes."
The Government has said it will formally respond to the 40 recommendations of the Inquiry into Mental Health and Addiction before March.
