Two women and a man had gone to a home to carry out a property inspection when they were shot, police have revealed.
Northland District Commander Superintendent Russell Le Prou has addressed media after the incident at a rural address on Mt Tiger Rd about 10km from Whangarei.
They were called to the incident about 10.50am today and found the women - who are believed to be related - shot dead.
The male property inspector has also been shot but is now in a stable condition in Whangarei Hospital with moderate injuries.
Police tried to negotiate with the alleged shooter - who they said was known to them - during the afternoon but got no response.
They used tear gas and the shooter fired several shots at staff, Le Prou said.
Police fired a number of shots in return and the house caught fire soon after, becoming "fully engulfed".
Le Prou said police believed the man is still at the house and it was "very unlikely" that he has survived.
"While police and the fire service are at the property, they will not enter the house until it is safe to do so."
The bodies of the women are yet to be recovered, while there are residents still trapped inside the cordon, Le Prou said.
He said the incident was not gang related.
The Independent Police Complaints Authority has been notified.
Neighbour Michael Jordan said he didn't know the man who lived in the home that well, but said the man had been living there for several years.
Jordan estimated him to be in his 50s, saying he didn't think the man had a wife or children, and in many respects was a "loner".
He also said he heard gunshots on Sunday and in the days prior. But he thought nothing of it given the rural setting.
Jordan lives a couple of hundred metres down the road from the house. He said he and his family were at work or in town when the shooting began.
They have since returned home.
A welfare centre at the Whareora Hall on Whareora Road had been set up for residents evacuated from a cordon around the home.
Cordons remained in place at the intersections of Mount Tiger Rd/Whareora Rd, and at Mount Tiger Rd/Whangarei Heads Road.
"We still have a number of enquiries to make to begin to understand the tragedy that has unfolded today," Le Prou said.
"Police will do everything we can to support the victim's families.
"Our community will be understandably shocked by today's events but Northland is a tight-knit community and will stand together to support one another."
Earlier, NZME reported that after a cordon was set up, a man in a red Suzuki with a bullet hole through the windscreen drove towards it. He got out and was taken by police to the back of a waiting ambulance.
Police asked residents at properties in the cordon to stay inside.
"If you are already in the cordoned area please remain in your house," Detective Inspector Dene Begbie said in a video statement posted on Facebook.
"If you see any activity on your property please call through to police on 111. I just want to thank the community for your patience.
"I assure you that as soon as we are able to we'll shut those cordons down and keep you informed of the progress of the investigation."
Workers at Rosvall Sawmill on Whareora Rd were ordered into lockdown at 11.30am and told to stay inside while police searched nearby paddocks.
Owner Hansen said all 55 staff spent nearly two hours in the company's smoko room waiting for the all-clear.
"Police said there had been a shooting up the road and suspected whoever was responsible was on the loose."
Hansen said it was frustrating to be in lockdown for nearly two hours.
"We're losing many thousands of dollars an hour but that's okay. Our staff come first," he said.
This afternoon he said he could see "lots of black smoke" about 2km away on Mount Tiger Road behind trees.
Fire Northern Communications Shift Manager Jaron Phillips said they had four fire crews including a water tanker and a command unit at the property.
Initial crews have been at the scene since 12.30 but the water tanker was called around.
"We're assisting police and responding to a staging area."
Police had been due to hold a press conference at 4.30pm but were delayed by half an hour due to the fire.
A man who lives close to where the shootings happened, said he knew one person at the house at the centre of the emergency but refused to comment further. He was at work and only heard about the massive police presence through text messages and phone calls from his friends and neighbours.