The authority placed restrictions on the experiment - the first in New Zealand to involve genetic modification outside a laboratory - including electronic animal tagging and a complete ban on any cow leaving the secured site.

Under the approved plan, a state research institute, AgResearch Ltd, plans to insert genes from goats, pigs, sheep, mice and humans into the cattle, with the resulting genetically modified embryos transferred into normal cows to create 'transgenic calves'.

"You do the research because you don't know the answers. Although some of the uncertainties of the research may be related to the risks, likewise some of those uncertainties may be related to the benefits," ERMA Chief Executive Basil Walker said.

If successful, the research could advance work to prevent or minimise multiple sclerosis, a chronic, potentially debilitating disease that affects the central nervous system, the AgResearch scientists said.

Anti-GMO lobby group GE Free New Zealand attacked the decision saying said the risks of genetically modified organisms getting into the food chain or crossing into other species was too great.

Genetic modification is a controversial issue in New Zealand where the economy is heavily dependent on agricultural produce and markets itself as having a green, pristine environment.

The recently re-elected, Labour-led coalition government plans to lift a ban on the commercial release of genetically modified organisms next year, a stand that caused the environmentalist Green Party to refuse to join Labour in power.