The Government is ruling out offering some prisoners amnesties to ease pressure on overcrowded prisons.
The Sentencing Trust (SST) has condemned the concept as "corrupt".
Chief Justice Dame Sian Elias sparked the debate in a speech where she said the controversial idea should be considered.
"We need to look at direct tools to manage the prison population if overcrowding is not to cause significant safety and human rights issues."
Dame Sian pointed to the system working in other countries to prevent overcrowding.
"Such solutions will not please many ... but the alternatives and the cost of overcrowding need to be weighed."
She also criticised the denial of bail and parole to inmates - an area the Government is considering tightening further.
"I question whether that strategy can reasonably be maintained," she said.
Dame Sian said if attitudes in relation to bail and parole were not relaxed, then the focus would have to go on the length of prison sentences.
She said this could result in either shorter sentences, changes to parole and bail laws or early release amnesty.
"Are we ready for solutions such as these?
"If not we will have to keep building prisons and diverting resources into incapacitation ...," Dame Sian said.
Justice Minister Simon Power said inmates would not get amnesties.
He also made a pointed remark about the role of the judiciary versus Parliament.
"This is not government policy. The Government was elected to set sentencing policy, judges are appointed to apply it."
Mr Power said the Government would "decide its own policy agenda".
Asked if that could include amnesties, he said: "I have ruled out such a move."
SST spokesman Garth McVicar was outraged by the idea.
"I think she is totally on the wrong track ... start talking about how people have choices and how they choose to commit crime or they don't and why are so many people choosing to commit crime in this country.
"That seems to me to be a total cop out."
Mr McVicar said already many offenders received single sentences for multiple crimes.
"Until we get back to holding people accountable for the crimes they commit then ultimately we are going to have more crimes committed."
An amnesty would dilute the deterrent effect of prisons and was unfair to victims of crime, he said.
"It's totally, totally corrupt."
Kim Workman, director of Rethinking Crime and Punishment, said Dame Sian had not suggested anything unusual.
"Over half the states in the USA are currently implementing or planning to implement early release schemes for prisoners to alleviate overcrowding," he said.
"What they now accept is that it can be done without increasing the recidivism rate or the crime rate. Internationally, there is no proven connection between the crime rate and the rate of imprisonment."
Mr Workman said that over the last 10 years, 85 percent of the increase in New Zealand prison numbers had come about through longer sentences and tighter parole provisions.
"What must be avoided at all costs is the steady deterioration of the prison system into a third world system that fails to meet the minimum standards required by the United Nations," he said.
Earlier this week Corrections Minister Judith Collins said the prisoner population was about to reach new highs.
The previous peak was 8457 prisoners in September 2007 - on Monday there were 8434 people in prisons or police stations.
"Within the next couple of weeks it's likely that we will have more people behind bars than at any other time in New Zealand's history," Ms Collins said.
Turning modular or container cells into prisons and double bunking were being used to help manage the "serious capacity crisis" in the short term.
Extending existing prisons and building new prisons were longer term options, Ms Collins said.
