Smoke was seen rising after an unstable chemical was exploded in South Dunedin just after 9.30am this morning.
Parts of South Dunedin were evacuated ahead of the explosion as a 100m exclusion zone was set-up around the Blis Technologies building to allow the Army Explosive Ordnance Disposal (EOD) team to get to work.
A reporter at the cordon heard the explosion, but said it was not that loud.
As of 9.50am emergency services were in the process of reducing the cordon to about 50m.
The area around Glasgow St was earlier a hive of activity this morning and the army was preparing to explode the chemical in a car park about 20m from the building.
Fire and Emergency NZ Senior Station Officer Rob Torrance, of Dunedin City Station, said the small volume of Hydrazine Monohydrate was seen to have crystalised around the lip of its container.
"Once it starts doing that it's quite unstable if it's moved."
Firefighters and a hazmat command vehicle rushed to the premises of the oral probiotics company shortly before 3.30pm on Thursday.
Torrance said the Army had informed crews on the ground the chemical was quite stable as long as it was left on the shelf, but it would become hazardous when moved.
An EOD specialist wearing a heavy armored bomb disposal suit would go into the building shortly after dawn, gingerly carry the chemical outside, place sandbags around the container then detonate it, he said.
Incident involving 'highly toxic' chemical in South Dunedin
Firefighters and a hazmat command vehicle have descended on a South Dunedin building after an incident involving a "highly toxic" chemical.
Several crews were at the scene on Glasgow St where at Blis Technologies.
A Fire and Emergency New Zealand (Fenz) spokeswoman said the chemical had not spilled and it was not a major incident.
The chemical was in a container, but Fenz was called over concerns it was "starting to react".
Firefighters were assisting at the scene and were also asking for advice about the nature of the chemical.
Firefighters have widened the cordon around the building, but nearby King Edward St remains open.
A firefighter at the scene said the chemical was "highly toxic".
Blis Technologies develops oral probiotics.