The fire on Signal Hill in Dunedin has been contained, but about 40 firefighters and three helicopters are continuing to fight the blaze.
Earlier tonight three homes in Rimu Street, Ravensbourne, were evacuated as a precaution. The occupants of these homes are likely to return tonight.
At this stage there is no risk to any other properties in Ravensbourne and no plans to evacuate any other homes, police said.
Logan Park Drive and Butts Rd will remain closed overnight.
Multiple fire appliances from fire stations across Dunedin, and three helicopters equipped with monsoon buckets are tackling the blaze on Signal Hill.
Plumes of black smoke are billowing into the sky and flames are licking the hill above Logan Park High School.
The fire was reported to emergency services about 2.45pm and affected several hundred square metres of scrub and trees.
A Fire Service command unit continues to operate at the scene.
The school is not believed to be in danger. Police have set up cordons and said they are helping the residents nearby.
Local residents said the fire 10 years ago was worse. Fire and police gathered in Manuka St to evacuate people if necessary.
Police urge people in the area to be responsible and follow the directions of emergency services and motorists should avoid the area, if possible.
James Winfield said he was at work when he got a call from his partner alerting him to the fire in the trees above Ravensbourne.
"I thought she was just exaggerating but as I drove home it realised, it's a pretty big fire," he said.
"At the moment I think it's going to be all right, the wind's no good. But Hannah [Boreham, his partner] is pretty nervous."
Jo McCullough, of Timaru, said she spotted smoke from the blaze on the motorway about 3pm.
About 100 people have gathered at Opoho Park and near the Caledonian Ground to watch.
Rachel Neynens, of Dunedin, called emergency services after spotting the fire about 2.45pm.
"My boyfriend and I were on the athletics track getting ready to do some exercise and we saw some smoke.
"Initially I thought maybe someone was having a bonfire or doing a controlled burn but a few seconds later it was quite big and I saw flames licking a tree."