The Heath report (1926) became the foundation on which today's governmental science is based. It recommended a Department of Scientific and Industrial Research, constituted as a special Department of the Government without any administrative authority, but with executive power in the conduct of scientific work for the benefit of industry, placed under the immediate supervision of the Prime Minister. Special consideration was given to such matters as agricultural research and here the report was particularly timely as it drew attention to the desirability of attaching the proposed dairy research laboratories to the new agricultural college to be set up in Palmerston North (Massey Agricultural College, now Massey University of Manawatu). Indeed, throughout his memorandum Heath was at pains to delineate the advantages of active collaboration between the scientific staff of the university institutions and the various State laboratories he envisaged. In general, with respect to agriculture, he advised that the Department (of Agriculture) should possess a scientific staff competent to undertake investigations into problems of immediate urgency. He saw the need for a number of new research institutes to serve the needs of the primary industries (fruit and fruit transport; cattle, sheep, and meat transport; economics, accountancy, and finance of farming; forestry and forest products) and envisaged the large secondary industries forming cooperative research associations. As a matter of the greatest urgency he recommended the establishment of a laboratory for standards and tests.

The report as a whole was both far-seeing and eminently practical in its detailed suggestion and was speedily acted upon, the Scientific and Industrial Research Act being passed in 1926. Under the Act the Department was established with a Permanent Secretary as administrative head, and an advisory Council of Scientific and Industrial Research reporting, however, not to the Prime Minister but to a Minister of the Crown. As amended by subsequent Acts (1931, 1945, 1952, 1958) the Council consists of a chairman, and not more than eight other members appointed by the Governor-General for a term not exceeding four years. Not more than two members of the Council may be officers employed in the services of the Government, who may be appointed as members of the Council by virtue of their office. The Permanent Secretary may attend and speak at all meetings, but may not vote. In addition to its more conventional duties, the Council is also responsible for the award of National Research Fellowships.

As an immediate outcome of the Act, the Dominion Laboratory and Dominion Observatory (from the Department of Internal Affairs), the Geological Survey (from the Mines Department), the Meteorological Office (from the Marine Department) and the Apia Observatory (from the Department of External Affairs) became the nucleus of the new Department. Some 10 years later (1936) a Plant Research Bureau (comprising Plant Diseases, Grasslands, Agronomy, Botany, and Entomology Divisions) was established at Palmerston North, and the Soil Survey became independent of the Geological Survey. In 1939 the largest unit of the Department, the Dominion Physical Laboratory, was formed and in 1959 the Institute of Nuclear Sciences was established with a New Zealand Atomic Energy Committee. These represent some of the landmarks in the development of what is now a large and most complex Department of State whose laboratories function over the whole spectrum of scientific activity – from fundamental studies in pure and applied science to service activities of a routine nature, required to maintain the work of government and industry. The organisation chart summarises the structure of the Department, the years in brackets denoting the dates of establishment of the units under their present designations, although in many cases the histories of these units can be traced much further back through changing titles and administrative arrangements.

In April 1964 it was announced that the name of the Dominion Laboratory would in future be the Chemistry Division, and that of the Dominion Physical Laboratory would be the Physical and Engineering Laboratory of the Department of Scientific and Industrial Research.