Acting Immigration Minister Kate Wilkinson and Tertiary Education Minister Steven Joyce said it appeared two agents in Beijing and Shanghai facilitated the fraudulent student visas.
Routine random sampling found 279 visa applications contained some form of fraud - 48 of those students had either left the country or had not arrived.
New Zealand received 25,000 applications from Chinese students each year.
Mr Joyce said there was no evidence the language schools knew the students had fraudulent visas.
"It is likely the private providers accepted the students in good faith,'' he said.
Immigration New Zealand, NZQA and Education New Zealand were investigating the breach.
Mr Joyce said qualifications gained by the students involved would not necessarily be stripped from them, but they would be dealt with on a case-by-case basis.
Ms Wilkinson said some of the students may have been misguided and were not part of the fraudulent activity.
The applications were believed to have begun in July last year and were uncovered a month ago. They made up the biggest breach Immigration New Zealand had uncovered.
Ms Wilkinson said she doubted staff at INZ were at fault, but an investigation would reveal more detail.
Mr Joyce said INZ would decide if charges would be laid against the two agents in China.
The University of Auckland's English Language Academy is not a private training establishment so was not among the 20 language schools involved, but a spokesman said it has its own visa office where all student visas are thoroughly checked.
Dominion English Schools' principal and general manager Martin Wall said he had received a letter today from Education New Zealand about the fraudulent visas.
Dominion English Schools did not have any Chinese students so was not involved.
"We have been operating English language schools since 1967 so we know who is dodgy and who isn't,'' he said.
