Whichever team wins this Group A clash will qualify for the semifinals with defeat for England guaranteeing the hosts' exit from a tournament for the world's top eight one-day international sides.
New Zealand would have had a smaller total to chase had not Nathan McCullum dropped Alastair Cook, who top-scored with 64, three times before clinging on to a chance off his own bowling to end the England captain's 47-ball innings.
Left-hander Cook was dropped on 14, 37 and 45 by Nathan McCullum, who did take four catches from seven chances.
Seamer Kyle Mills returned figures of four wickets for 30 runs and left-arm quick Mitchell McClenaghan three for 36, with England losing their last seven wickets for just 28 runs as their innings ended with three balls to spare.
Opener Ian Bell, dropped on seven, was out for 10 when New Zealand captain Brendon McCullum, who won the toss, held a superb catch at short extra-cover off McClenaghan.
And 16 for one became 25 for two when Jonathan Trott, chipped Mills straight to Nathan McCullum, Brendon's older brother, at mid-wicket.
Trott's exit gave Mills his 25th Champions Trophy wicket, surpassing the competition record of retired Sri Lanka spin great Muttiah Muralitharan.
James Franklin nearly had a wicket first ball when Cook pulled him to mid-wicket only for Nathan McCullum to drop the chance.
Left-hander Cook, not renowned as a power player, drove Franklin for six and four balls later flicked him over his shoulder for a four.
But off the last ball of the 13th over, Franklin almost had him again only for Nathan McCullum once more to drop a juggled chance at mid-wicket.
Joe Root exited for 38 when he skyed McClenaghan to wicketkeeper Luke Ronchi. However, Nathan McCullum then put down a relatively easy catch when, at backward point this time, he dropped Cook's cut off Kane Williamson before England's innings tailed off. – Sapa-AFP