Li will be the first Chinese premier to visit New Zealand since 2017, embarking on a trip that is widely tipped to also take him to Australia.
China is New Zealand's largest export destination, and Wellington has been one of Beijing's closest partners among Western democracies.
But relations have become strained in recent years as China has looked to expand its military and diplomatic reach across the Pacific.
"I look forward to warmly welcoming Premier Li in New Zealand," Luxon said in a statement.
"The premier's visit is a valuable opportunity for exchanges on areas of cooperation between New Zealand and China."
Luxon said Li -- China's number two official -- would arrive to a ceremonial welcome and official dinner "later this week", before a series of bilateral meetings.
Li follows a string of high-powered Chinese delegates who have made the trip to New Zealand in recent months.
Foreign Minister Wang Yi held high-level talks during a visit to the capital Wellington earlier this year.
New Zealand's recently elected centre-right government has pivoted towards closer ties with Australia and the United States.
It has also been mulling its involvement in the landmark AUKUS security pact between Washington, Canberra and London -- a move that would greatly irritate China.
New Zealand's foreign minister in May hit out at China's bid for an increased security presence in the Pacific Islands, warning against actions that could "destabilise" or undermine regional security.
"New Zealand and China engage where we have shared interests, and we speak frankly and constructively with each other where we have differences," Luxon said on Monday.
"Our relationship is significant, complex and resilient."
- Smoothing differences -
Jason Young, an expert on China-New Zealand relations, said Li's visit showed both sides were willing to set aside these disagreements.
"The high-level visit in itself is a win," said Young, from New Zealand's Victoria University.
"It's primarily designed for both sides to demonstrate that many challenges in the relationship are being managed."
With China's economy showing signs of slowing down, diplomats and trade officials were looking to "engage with as many markets as they can", Young added.
"New Zealand already has close to a third of our exports going to China. We're kind of at saturation point. Whereas for China, there's a lot more momentum to improve relations."
Li is expected to visit Australia after New Zealand, although Canberra has yet to confirm that leg of the trip.
"The potential visit of the Chinese premier will be confirmed in the usual way," Australian Prime Minister Anthony Albanese told reporters on Monday.
China and Australia have been patching up their own relationship in the wake of a bitter and costly trade dispute.
Starting in 2020, a slew of Australia's most lucrative export commodities were effectively banned from China.
But as relations have improved under a new government in Canberra, China has dropped tariffs on Australian beef, barley and wine, halted an import ban on timber and resumed shipments of coal.
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