The crash happened on Egmont St, at the corner with Gloucester St, about 4.15pm.
Two people including the tanker driver were taken to Hawera Hospital by ambulance with moderate and minor injuries, a St John spokesperson said.
Egmont St resident Jonquille Baxter was having an afternoon nap when she heard an explosion.
"I just heard this bang. I got up and went and had a look and then seen this fire flaming up.
"The car looked like it was rolled over and on fire. And there was a truck."
Ms Baxter said big plumes of black smoke clouded the area and emergency services arrived at the scene quickly.
They were still at the scene just before 6pm.
It was the second crash in the area this week, Ms Baxter said, with another less serious accident happening a couple of days ago just around the corner.
"It's bloody sad," she said.
A Patea woman who arrived on the scene shortly after the accident said the people in the car had been visiting a friend and were just leaving their friend's house when the collision happened.
She said the people in the car were locals.
The woman said bystanders were able to help the tanker driver out of his vehicle.
A resident on nearby Gloucester St, who did not want to be named, said those involved in the crash had earlier been at a house on Egmont St.
The man said he did not see the moment of impact, but had come outside of his house to investigate after hearing a "horrendous bang".
He said another neighbour, who saw the incident, had confirmed what had happened.
"I don't know how many were in the car, but they were backing out and they backed into a milk tanker.
"We've got probably 50 milk tankers a day that go through here and they all use the speed limit that they're allowed to.''
The resident acknowledged it had been a sad day for everyone involved, including residents in the area.
"Really and truly it's a bit of a shock to us,'' he said.
The car is hidden under a tarpaulin and the front of the tanker is charred.
In the momentum of the accident the tanker brought down a power pole.
Police, fire and St John ambulance attended.
