Mallard, who has specific responsibility for World Cup delivery, has announced that a new arena in the style of Wellington's Westpac Stadium is set to replace the iconic Auckland rugby venue Eden Park.
A 60,000-seat arena in the country's biggest city was central to last year's successful Kiwi bid to host the 2011 tournament.
But according to Mallard, costs and planning issues have ruled out Eden Park as a viable location, with a new venue close to the city's Americas Cup village now proposed ahead of several other possibilities.
Mallard said: "The government has decided that a waterfront location is the option that can most meaningfully contribute to the Government's vision for Auckland as a truly world-class, international city.
"This has been a finely balanced call with little difference between the two options in terms of cost and construction timelines. Advice from the experts shows that both can be delivered on time."
New Zealand Rugby Union chairman Jock Hobbs added: "The New Zealand Rugby Union and New Zealand Government made a commitment to a 60,000-seat, world-class stadium in Auckland in our bid to the International Rugby Board in November last year.
"The vision for Stadium New Zealand is bold, innovative and exciting. While the final decision is yet to be made, RNZ 2011 is supportive of the decision to proceed with a waterfront site."