Rotorua acting area commander Inspector Greg Sparrow said a gang member from Kaingaroa had been arrested over an unrelated bail breach.
A teenager living on Tawa St said Kaine was staying with relatives when he died.
She said there was an altercation between gang members moments before she saw Kaine lying on the ground and she thought he may have been hit by a vehicle.
"I went and helped him ... it all happened outside my house," she said.
"I was just holding his head up, it was bleeding hard-out. He was asleep."
Sparrow could not say how Kaine died but said a post mortem had been carried out.
Police and Environmental and Scientific Research scientists were continuing a scene examination around the area Kaine's body was found. Witnesses were being spoken to and extra police had been deployed to the area.
"The death of a 17-year-old boy is a tragic loss of life and our priority is to remain focused on the job and ensure the investigation is bought to a successful conclusion for the family, [and the] Murupara and Kaingaroa communities."