Inspector Clifford Paxton, area commander for the Western Bay of Plenty police area, said given the students' light clothing there was real concern for their welfare.
Conditions were clear but cold, with temperatures expected to drop to about 5 degrees overnight.
"The parents were obviously very, very relieved that their children had been located," Mr Paxton told assembled media, who had been cordoned off from the lodge.
He said the children were found by a search and rescue team in an area which was a 2 hour walk from State Highway 29.
St John ambulance staff would assess the students before they were taken back to the Tauranga Intermediate School grounds.
Earlier, board chairwoman Pippa Smith said the students were members of a party of about 50 Year 7 students on a regular school camp.
Mrs Smith said the students, aged 11 and 12, are from two classrooms and all attend the school's Whanau Unit, which is the school's bilingual unit.
Principal Brian Diver was not with the group but went to the scene after learning what had happened, she said.
The lodge, which is at the foot of the Kaimai Mamaku Forest Park, has been owned by the school for a number of years.
According the the lodge's website, students "will be faced with a challenging programme" over a five day camp.
Its motto is "challenge through encouragement" and activities include rock climbing, mountain biking, tramping, rafting to paint ball.
Arthur Sutherland of Education Outdoors New Zealand, the association for outdoor educators, said risks were assessed for all activities involving children.
"The Ministry of Education has produced a set of guidelines...that talk about identifying the hazards that might be associated [with an activity]."
Mr Sutherland said without more information he could not comment on what may have gone wrong.
additional reporting - Bay of Plenty Times
