The escape of 32 tourists from a flaming coach in the Homer Tunnel near Milford was a miracle, says the chief firefighter at the scene.

The Ritchies Coachlines bus was taking Singaporean tourists back to Queenstown from Milford Sound and was inside the tunnel about 2pm yesterday when the driver noticed flames coming from the motor at the back.

He stopped about 150m from the eastern end of the tunnel and got the passengers out before the burning bus rolled back 50m, with acrid black smoke pouring out to the tunnel entrance.

Firefighters, police and ambulances were called from throughout the region to the tunnel, which is 103km from the closest emergency services at Te Anau.

Firefighters wearing breathing gear battled thick smoke to put the fire out.

"What we are looking at could have just as easily been a tragedy," Te Anau fire chief and on-scene commander Graeme Humphries said. "But the way things turned out, she's turned into a miracle."

A police spokeswoman at first said two people were missing, but they were later found at the other end of the tunnel.

Three of the 32 passengers from the bus were flown to Southland Hospital in Invercargill to be treated for smoke inhalation. They were later discharged.

The other passengers were checked at the Te Anau Medical Centre.

About 750 visitors were stranded in Milford Sound because of the wreck in the tunnel, which is the only road route out.

Ritchies manager Robin Stevenson said the passengers were coping well.

"They are not jovial but they are talking to each other."

He did not know the cause of the fire.

The driver, whom he would not name, did his "normal check" of the bus before driving into the west end of the tunnel.

Close to the eastern end he noticed flames coming from the rear of the bus, stopped it and got everyone out.

"He did a very good job," Mr Stevenson said. The bus lights went out in the fire and the passengers had to get out in the pitch darkness.

They linked hands and walked out of the tunnel, although two headed in the wrong direction towards the Milford end.

The passengers were taken back to the Te Anau Medical Centre by bus and, before the trip back to Queenstown, were taken to a shop to buy nightwear and given a meal.

"If all their luggage is damaged, which I don't know, everybody will be well and truly looked after by the tour company and us. Costs don't worry you in a crisis like this."

It was inevitable there would be an incident like the bus fire in the Homer Tunnel, Mr Stevenson said.

"It has been on the cards for so many years."

The tunnel is due to reopen this morning once the bus has been pulled out.