The Pope has accepted the resignation of the Bishop of Palmerston North, Charles Drennan, following an allegation of "unacceptable behaviour" of a sexual nature.
And NZME can reveal the church is investigating a second allegation made against him by a different woman.
Drennan's removal is significant since the church has long considered sexual relationships between clerics and adult women to be sinful, but not criminal or necessarily worthy of permanent sanction.
The #MeToo movement and the scandal over ex-Cardinal Theodore McCarrick, however, have forced a reckoning about the imbalance of power in relationships between clerics and lay adults, nuns and seminarians, and whether such relationships can ever be consensual.
The Metropolitan Archbishop of New Zealand, Cardinal John Dew, said in the eyes of the Catholic church, Drennan's behaviour with one of the women was "completely unacceptable".
Speaking to NZME from Rome, where he is for a global meeting of cardinals, he said Drennan admitted to engaging in sexual behaviour with her. She was in her late teens when the events took place.
She met Drennan through the Catholic church. It took eight years for the woman to come forward.
"The complaint came just when Pope Francis issued some new regulations to deal with any accusations about Bishops that fell to me to do as the metropolitan archbishop.
"I contacted Rome. Told them we'd received the complaint. They told us to go ahead with an investigation. So the investigation was carried out by an independent third party licenced investigator employed by the National Office for Professional Standards. The people concerned were interviewed."
Cardinal Dew - who is due to meet the Pope in Rome in the next few days - said Bishop Drennan stood aside from his duties and both he and the young woman participated in the investigation.
The office found the behaviour was inappropriate for a bishop of the Catholic church, but not criminal.
Cardinal Dew said people often take years to pluck up the courage to make a complaint and it must have been the right time for the woman involved.
The Church was committed to giving continuing support to the young woman, her family and those around her.
"The young woman has requested that details of the complaint remain private," said Cardinal Dew.
"In the eyes of the Catholic Church, Bishop Drennan's behaviour was completely unacceptable, and it fully supports the young woman for coming forward to NOPS."
He said another investigation was ongoing after a second woman made further allegations.
He said the relationship could be described as an "adult to adult relationship". It is not known if Drennan has admitted to the relationship.
While the woman didn't want to make a formal complaint, the matter has since been referred to the Vatican and is being investigated by the Church.
The Bishop tendered Drennan's resignation to Pope Francis.
The Pope's decision was announced by the Vatican at 11pm on Friday NZ time.
The young woman has been informed of his resignation and the Church is in ongoing contact with her, Cardinal Dew said.
The clergy, staff and church leadership of the Diocese of Palmerston North had been told of the acceptance of the resignation and provided with guidance and resources to help them to support parishioners and other members of the Catholic community. The wider Church of New Zealand would also be advised and supported.
"The Catholic Church has no tolerance for any inappropriate behaviour by any of its members. I encourage anyone who experiences such behaviour to bring it to the attention of the Church, police or any organisation with which they feel comfortable," said Cardinal Dew.