Kyle Mills ripped the top off England's batting and Chris Martin took two wickets in an over to bowl England out for 110 and give New Zealand a 189-run victory on the final day of the first test on Sunday.
Mills took four wickets before lunch to destroy England's possible run chase for 300 to achieve victory, while Martin bowled Tim Ambrose and had Ryan Sidebottom caught behind by Brendon McCullum in one over after lunch to end their hopes.
Ian Bell top-scored for England with 54 not out while Mills finished with figures of four for 16 off 13 overs and Martin had three for 33 off 13 overs.
England had been set the target in a minimum of 81 overs after New Zealand declared their second innings on 177 for nine early during the first session.
It was New Zealand's biggest victory margin in terms of runs against England, surpassing the 83-run win at the Oval in 1999. It was just their eighth test win in 89 matches against England since they began playing each other in 1930.
Resuming on 36 for four, Bell hit the first ball after lunch off Jeetan Patel for four and looked positive at one end, while Paul Collingwood looked to occupy the crease.
It took 33 balls for Collingwood to get off the mark, but he only added one more to his total, off a further 17 balls, before he chopped a Daniel Vettori delivery on to his stumps.
He had already survived two confident leg before appeals from the New Zealand captain in the over.
Martin then replaced Patel at the other end and had immediate success, bowling Ambrose with a delivery that just seamed away and took the off bail. He then had Sidebottom caught by McCullum off the last ball of the over.
McCullum also snapped up Matthew Hoggard off Martin for four, before Patel had Steve Harmison caught by a juggling Stephen Fleming for one.
Monty Panesar was the last man out when he edged Jacob Oram to McCullum for eight.
Prior to lunch, Mills had ruined any faint notions England had of chasing down the total by blasting through the top four.
He had Alastair Cook caught by McCullum for 13, trapped England captain Michael Vaughan lbw for nine, then had Strauss caught for two by McCullum.
The dangerous Kevin Pietersen was then trapped by Mills for six to give the Auckland pace bowler figures of four for nine off seven overs at lunch.
New Zealand declared shortly after Vettori was caught by Cook for 35 off Sidebottom, who ended the match with a hat-trick and his first 10-wicket haul in tests.