Foreign Affairs Minister Winston Peters told Morning Report the allegations warranted a proper investigation.
But he said the critical issue was the humanitarian crisis in Gaza.
According to the Hamas-run health ministry more than 26,000 people have been killed in Gaza since Israel launched a military operation in response to 7 October.
Peters said it was possible there were a few “rotten apples” within UNRWA.
“If the matter has been dealt with, and with assurances that it does not happen in the future, then the crisis is of a level, we must, I believe, and I think the New Zealand people would want us to respond to the crisis rather than to react in that way and punish a whole lot of innocent people because of the actions of a few.”
Peters said it would be premature to make a decision before the UN finishes its investigation.