Attorney General Hector Balderas filed the lawsuit in state district court late Tuesday. He alleges Volkswagen, Audi, Porsche and their U.S. subsidiaries violated New Mexico's air quality standards and engaged in deceptive marketing to pass off certain diesel models as clean and efficient.
"Supported by a massive advertising campaign, defendants claimed that superior engineering allowed their cars to perform better, consume less fuel and emit fewer harmful pollutants than diesel cars of the past, making them a great fit for eco-conscious consumers. In fact, the complete opposite was true," the lawsuit says.
Dozens of state attorneys general have teamed up for a civil investigation of VW. Others are conducting separate inquiries.
Earlier this month, the U.S. Justice Department sued on behalf of the federal Environmental Protection Agency. That action alone could potentially expose VW to more than $20 billion in fines under the Clean Air Act.
A spokeswoman for VW declined to comment on New Mexico's lawsuit.
The automaker has acknowledged installing software on cars that turns on pollution controls during government tests and shuts them off on the road. It first admitted in September that suspect software was installed in cars with its popular 2.0-liter diesel engines. It later acknowledged similar software was also included in diesel vehicles with 3.0-liter engines.
Matthias Mueller, VW's chief executive officer, apologized earlier this month for the scandal and said the company's most important task in 2016 would be to win back its customers' trust. He has suggested a small number of software developers in Germany are to blame for the suspect computer code.
The company has hired a U.S.-based law firm to conduct an internal investigation.
According to New Mexico's lawsuit, somewhere between 4,000 and 10,000 of the affected models were delivered, marketed and sold in the state — from Volkswagen Beetles and Jettas to several Audi models and the Porsche Cayenne.
Prosecutors say the vehicles exceeded average nitrogen oxides emission limits by as much as 30 to 40 percent. Such pollution contributes to smog and has been linked with serious health effects such as asthma attacks.
New Mexico prosecutors are seeking a jury trial as well as damages, including penalties for each day and each violation of the state's air quality act.
The AP contributed to this report.