The Government Communications Security Bureau (GCSB) has declined Spark's proposal to use Huawei 5G equipment in its 5G network.
Spark recently notified the director-general of the spy agency, as it is required by law to do, of its planned approach to implementing 5G technology on its mobile network.
The plan involved the deployment of Huawei 5G equipment in Spark's planned 5G radio access network (RAN), which involves technology associated with cell tower infrastructure.
Spark said it had been informed on Wednesday that the director-general considered that the plan would raise "significant national security risks".
This means Spark cannot implement its proposal.
Spark said it would review the reasoning behind the decision and consider what further steps it could take.
"While we are disappointed with this decision, we are confident that the decision will not affect our plans to launch Spark's 5G network by July 1,2020, subject to the necessary spectrum being made available by the New Zealand Government."
Huawei's links to the Chinese Communist Party and the business environment in China, where even private companies have strong Government connections, has led to Huawei being considered a security threat.
Australia and the United States have blocked the firm from supplying 5G equipment for security reasons.
Earlier, 2degrees warned that Kiwis can expect to pay more for mobile services if Chinese giant Huawei is barred from selling 5G telecommunications equipment to New Zealand.
Spark warned a ban would also impact its costs.