The victory gave the Kiwis a 2-0 lead in the five-match series.
The tourists, who needed to win the match to retain the top ranking, made a valiant effort to overhaul a revised target of 297 in 42 overs, but could only muster up 277 for 9 in 41.3.
When rain intervened for a second time and the match was called off, the Duckworth-Lewis par score was 293 in 41.3 overs.
- PHOTOS form the Hamilton ODI
Following the defeat, Australia will regain pole position in the ICC ODI rankings which they surrendered to India last January.
Put in to bat, the Kiwis rattled up 271 for 7, riding on Kane Williamson's 76 and all-rounder Corey Anderson's rampaging 17-ball-44, which included five huge sixes.
They amassed a whopping 101 runs in 8.4 overs after the second rain interruption, in the 34th over (33.2), with the total 170 for 2.
Skipper Ross Taylor also chipped in with a useful 57 off 56 balls, which included seven hits to the fence.
India, left with the daunting task of chasing a revised target of 297 as per the D/L method, were again done in by a shaky start and lack of big partnerships.
Virat Kohli, who hit a century in the first ODI, again top-scored with a sparkling 78, while skipper Mahendra Singh Dhoni (56), Suresh Raina (35) and Ajinkya Rahane (36) got the starts but were unable to translate them into match-winning knocks.
Tim Southee (4-72) was pick of the New Zealand bowlers, while Anderson again displayed his all-round prowess, claiming three for 67, the wickets of Dhoni, Ravindra Jadeja and Bhuvneshwar Kumar.
Openers Shikhar Dhawan (12 off 22 balls) and Rohit Sharma (20 off 34 balls) wasted a lot of deliveries as India failed to take advantage of the bowling Powerplay.
The defeat was all the more heartbreaking as India had relinquished the top position in Tests to England back in 2011 after a 0-4 whitewash.
Earlier, it was another listless performance by the Indian bowlers after Williamson set the platform for the Kiwis with a polished knock and helped all-rounder Anderson cut loose.
Mohammad Shami (3-55) was again India’s the most successful bowler, while Bhuvneshwar Kumar (1-43), Ishant Sharma (1-46), Ravindra Jadeja (1-46) and Suresh Raina (1-18) took a wicket each even as Ravichandran Ashwin's (0-50) poor form with the ball continued.
A long rain break failed to dampen the home team's scoring although they lost five wickets post the stoppage of play.
Williamson and Taylor started off after the rain break, looking to up the ante immediately as the Kiwis had a little over eight overs left to play.
The former, though, was immediately stumped in the 34th over off Jadeja.
Williamson hit 77 off 87 balls, laced with five fours and a six, and added 60 runs with Taylor.
Skipper Brendon McCullum's decision to send Anderson ahead of himself to take advantage of the bowling Powerplay was a good move. Anderson made full use of it as he pummeled the Indian bowling for five sixes in his 17-ball stay, carting two each off Ashwin and Ishant.
His 50-run partnership with Taylor came up off only 21 balls. The pair added a massive 74 runs in 4.4 overs.
Taylor wasn't quiet either as he posted his 26th ODI fifty in the process. The big-hitting all-rounder was out caught in the deep in the 39th over, but, by then, he had done his job.
Image: Tim Southee of New Zealand bowls during the One-Day International match against India at Seddon Park
Photograph: Anthony Au-Yeung/Getty Images