Firefighters have got the large blaze at an industrial building in Tūrangi under control, following a four-hour battle.
A Fire and Emergency NZ spokeswoman said crews had been called to the large blaze on Atirau Rd about 9.55am.
Eight appliances, a command unit and other supporting vehicles had been sent to the scene from Tūrangi, Taupō, Rotorua, Whakapapa, Ohakune and as far as Greerton in Tauranga, she said.
By 1.30pm, she said crews had the blaze under control and were now in the final stages of mopping up.
The Turangi Fire Brigade said in a Facebook post there was a large structure fire in the industrial area of Turangi at present.
"Please avoid Atirau Rd area as roadblocks will be in place," the post said.
The Rotorua Daily Post understands the fire is at the Tūrangi Rylock building.
A woman who works nearby said police had set up cordons at the intersection of Te Rangitukehu St and Atirau Rd.
She said she could see a lot of smoke.
A police spokeswoman said nearby premises had all been evacuated.
Zane Cozens, who works 200m from where the fire was happening, said the town fire siren had gone off about 9.45am.
From his view, the building "didn't look like it could be saved," he said.
To his knowledge, the building was currently being used as a carpet storage and manufacturing facility.
The shed had originally been built in the 60's by the Ministry of Works and Development, he said.
A police spokeswoman said officers were currently helping with traffic management and they were putting cordons in place around State Highway 41 and State Highway 1.
There was a diversion along Puataata Rd, she said.
A St John spokeswoman said one ambulance was at the scene on standby.
Taupo District Council senior customer officer Alex Good said a staff member was on scene monitoring the flow of water from the fire hoses going into the stormwater.
"No water is going into the storm water. If there is anything it's just coming straight from the fire trucks themselves"
"The water is under control and shoudn't be contaminating the drinking or stormwater," she said.