He said in a speech that he wants a nationwide vote held within the next three years.
The nation's current flag depicts the Southern Cross star constellation in red and includes Britain's Union Jack flag in the top left corner. Many complain the flag is too similar to Australia's and doesn't reflect New Zealand's independence from its former coloniser, Britain.
Some want to keep the flag while others debate the best possible replacement.
Key has said he favors a silver fern set against a black background. Opponents say that would associate the flag too much with sports teams, who often use it, and is too reminiscent of a pirate ensign.