Authorities said two boats were towing two biscuits about 4pm on Monday, and the man was hit by the other boat - though a bylaw restricts the speed of two vessels within 30m of each other to five knots.
Taupo St John Ambulance acting team manager Steve Lynch said paramedics in the Youthtown Rescue Helicopter made the eight-minute flight from Taupo to Lake Ohakuri, the largest artificial lake of the Waikato River hydro power system.
Mr Lynch said the man had fatal injuries to his head and neck. Paramedics tried to revive him but he died at the scene.
The accident happened in the remote Whirinaki Arm of the lake, said a regional council spokeswoman.
Maria Pattie, a resident of nearby Dods Rd, said the friends and their families came to the lake every year.
They had moved their camp on to a reserve on private property after the main campground on the lake closed about five years ago.
"It was their friend. It's ripped them up," Ms Pattie said.
"They cleaned up all the campsite today and they've left. They're all very upset and they've gone home."
Mrs Pattie said the day of the accidents was "a nice day - beautiful. They would have gone out excited".
She said the dead man was "just a loveable guy".
The group gathered from different places, including Hastings, Rotorua and Taupo.
But they might not be back again and it would be a shame to not see them again, Ms Pattie said.
The Waikato Regional Council spokeswoman said two harbourmasters in the region were helping police with their investigations.
"There are rules in the Waikato Regional Council's bylaw which specifically cover Lake Ohakuri, and they state that vessels within 30m of each other should be travelling at 5 knots or less," she said.
Another neighbour, Sister Seraphim of the Tyburn Monastery on Dods Rd, said there had been several boats racing up and down the lake - and the activity resumed the day after the accident.
"We've had two very big speed boats drag racing on the water," she said.
