Mr Key said a further 30 to 40 individuals who were not on the watch list required further investigation.
He said New Zealand's risk and threat profile was changing. He said he did not want to overstate the risks, "but I do think we need to acknowledge the facts".
He said the rise of ISIL posed a threat locally and internationally.
"We're extremely concerned about New Zealanders being attracted to this brutal regime ? as in other Western countries, ISIL has been successful in recruiting New Zealanders to its cause."
Government announced a review of foreign fighters security settings for "foreign fighters" last month. Today, Mr Key outlined some of the law changes New Zealanders could expect as part of the urgent law changes.
The Security Intelligence Service (SIS) would be able to conduct emergency surveillance for up to 48 hours without a warrant in urgent cases.
The SIS would also be able to carry out video surveillance of private properties, similar to police powers in the Search and Surveillance Act.
The new legislation would give the Minister of Internal Affairs power to cancel passports for up to three years, and temporarily suspend passports for up to 10 working days in urgent cases.
Government has also committed to $7 million more in funding for the SIS to increase the number of staff working on investigations.
Officials would also consider whether a new criminal offence could be created for foreign fighters, as in Australia.
This issues required a longer time frame to consider, Mr Key said.
He described the changes as "responsible and narrow" and said they would be subject to a sunset clause.
Mr Key said the rise of such a well-resourced, globally-focused terrorist group which was highly skilled in social media recruitment was a "game changer" for this country.
"ISIL exposes us to a type of threat that we lack both the legislative tools and resources to combat."
Mr Key said he was limited in what he could reveal, but said individuals in New Zealand were attracted to carrying out similar attacks to those seen in Australia and Canada.
"Even those radicalised New Zealanders who have been prevented from travelling are a distinct threat to our safety and security.
"People who are prevented from performing terrorist acts abroad can turn their minds to terrorist acts at home, as the people of Canada experienced in recent weeks."
He had no doubt that some would argue Government's actions would increase the risks to New Zealanders at home and abroad.
"My view is that there is already risk in all of those areas. And the risk associated with ISIL becoming stronger and more widespread far outweighs that."
Menawhile, Mr Key ruled out sending troops to the Middle East in a combat role.
New Zealand will instead send military planners to determine whether New Zealand can play a role in training local security forces.
This approach was previously taken in Afghanistan, where some military personnel are still working with local forces.
In a statement, Defence Minister Gerry Brownlee said: "We acknowledge that some form of capacity-building is clearly required if Iraq is to have a future as a law-abiding democratic country and this will need to include a modern Iraqi military to maintain peace and security."
