NZDF has apologised to the hotel and guests, and has offered to assist in making repairs in the hotel.
Matavai Resort manager Sarah King told APNZ the matter had been referred to police.
"We won't be making any comment as the matter is with the Niue police."
The full statement from the NZDF spokesman said, "A small number of NZDF people were in Niue in the week of 30 June, preparing for a significant exercise later in the year.
"The NZDF can confirm that in the early hours of Wednesday 2 July it appears that fire extinguishers at the hotel where they were staying may have been let off by a member or members of the NZDF.
"The NZDF has been advised that this disturbed guests and damaged rooms at the hotel.
"The NZDF is taking this matter very seriously, and the incident is now the subject of an investigation by military police.
"Meanwhile, the NZDF has apologised to the hotel and guests and is seeing what assistance it can offer in making repairs at the hotel.
"Until the military police investigation is finished, it would not be appropriate to make any further comment, so as to avoid prejudicing any legal processes that may follow."