The Far North blaze that called out three fire crews and two helicopters is now under control.
Fire Service northern shift manager Karen Larking said they were called around 6.50pm to the fire on Marlin Drive, Taupo Bay.
"It was 70 metres by 70 metres and climbing up steep terrain."
Firefighters work to protect nearby homes and baches.
Larking said there were no concerns anyone is missing and there were no evacuations.
A Fire Service spokesman said the fire is now dampened down and the helicopters have left the scene. The ground crews will stay to monitor it.
Thomas Barnsley, 21, was on holiday at a bach in Taupo Bay when he saw the smoke around 6.30pm. He decided to video it as you "should probably document something like that".
"We initially thought it was somebody's tractor blowing up.
"When the smoke didn't start to go away we went outside. We saw really big flames and flashing lights at the southern end of the bay."
Barnsley said the fire was unexpected but they weren't concerned about it coming too close to their bach as the wind was blowing the blaze away from them.
A local woman staying at a campground said she could see the flames.
"There was an awful lot of smoke. The flames were going up the hill."
She thought the fire had been dampened down now.
"It's all well-contained and controlled now."