Revenue from video game sales rose seven percent year-on-year to NZ$424 million in 2016, the Interactive Games & Entertainment Association says.
Meanwhile, revenues in Australia rose four percent year-on-year.
According to data released by the IGEA, the New Zealand video games industry saw a total of NZ$125 million in traditional retail sales, and an additional NZ$299 million in digital and mobile sales.
According to research commissioned by IGEA from analyst firm Telsyte, digital and mobile sales saw 16 percent growth on 2015's revenues.
Mobile games remain the largest revenue source, generating NZ$167 million last year.
Downloadable games and downloadable content (DLC) saw the most growth – up 20 percent and 21 percent respectively.
Complementary market data from The NPD Group showed that traditional retail sales decreased nine percent on 2015's figures, with hardware and software sales both declining.
However, consumers’ digital purchasing habits far outweighed the decline in traditional retail sales.
"The New Zealand video game industry is in great shape and continues to grow year-on-year," said IGEA CEO Ron Curry.
"The data clearly shows an ongoing revolution in the purchasing habits of what is an increasingly digital customer base.
"Consumers are incredibly engaged with our industry’s products and have embraced new ways to access and play game content, and extend the life of their games, such as virtual and augmented reality and downloadable extras."
Telsyte managing director Foad Fadaghi said greater availability of high speed broadband had a hand in higher digital sales.
Telsyte also reported that PS4, Xbox One and Nintendo 3DS all experienced growth in the volume of software sold, and that 53 percent of games sold had an unrestricted classification (G, PG or M).