The Office of Film and Literature Classification action means "Maniac" cannot be screened anywhere other than film festivals or as part of academic study. DVDs of the film will not be allowed for sale.
The government censor said the film's graphic violence could harm the public.
Monster Pictures, distributor of the film for Australia and New Zealand, said on Thursday that the decision was a gross overreaction.
The remake of a 1980 slasher film premiered at the Cannes Film Festival last year.
Wood is part of the large ensemble cast in the New Zealand-filmed trilogies, "The Hobbit" and "Lord of the Rings."