"It just came up between a bunch of surfers," she told AAP on Monday.
"They weren't even that far out. He lost both his legs."
The victim's friends were shaken up and looked "white as a ghost" as they carried their mate's board away from the beach, the local said.
NBN reporter Ashleigh Saunders, who posted a photo of the scene, tweeted that a great white shark was to blame for the attack.
"It's thought the victim is a Japanese tourist," she tweeted.
The man had reportedly been body-boarding.
Ballina's mayor, David Wright, told the Syndey Morning Herald that rescuers believed the shark to be a great white.
The man had been sitting on a board when the shark came up from below, Mr Wright said.
The shark bit the man's legs and pulled him off the board, he said.
"For a shark to take the board and the person sitting on it, it's got to be very big," Mr Wright said.
The shark was likely to be the same one that attacked a man at nearby Byron Bay yesterday, he said.
Beaches were closed between South Ballina and Lennox Head after the attack, which came shortly before 10am (noon NZT) today.
Surf Life Saving NSW said its officers and lifeguards cleared the beach at Ballina at the direction of police.
Beaches are not patrolled at this time of year but as a result of the shark attack, lifeguards will be stationed at all beaches around Ballina to keep the public informed and out of the water, the lifesaving service said in a statement today.
Lifeguards patrolling the waters on inflatable rescue boats and jet skis continue to look for the shark.
NSW Surf Life Saving manager Andy Kent told the Northern Star: "This is obviously a very serious incident and we would ask that the public follow the directions of emergency service workers.
"Our thoughts go out to the man's family and friends, who will [be] dealing with this tragedy."
Attack follows nearby close-call
Meanwhile, a surfer is recovering in hospital after a suspected shark attack up the coast near Byron Bay, only 25km north of Ballina.
Jabez Reitman, 35, was sitting on his board about 60m off Seven Mile Beach early yesterday morning when he was struck from behind.
The father of one didn't see what hit him and neither did a friend surfing with him, but he suffered a cut to his back and puncture wounds to his buttocks.
He drove himself to Byron Bay Hospital and was taken to Gold Coast Hospital where he is in a stable condition.
Mr Reitman yesterday described the attacker as a 2-3m shark.
"I just freaked out," Reitman told reporters as he was taken from an ambulance at a hospital yesterday.
"I thought it was a dolphin at first until I started feeling and realised it was pretty significant lacerations."
He later added: "I saw blood and I thought I'd better get back to shore."
Mr Reitman said of his decision to go surfing: "I should've stayed in bed."
He added he was "shocked but in good spirits".
Police have yet to interview Mr Reitman.
Today's attack is the third shark fatality in 10 months in New South Wales.
In September, 50-year-old Paul Wilcox was killed by a great white shark while swimming at Byron Bay.
Christine Armstrong, 63, was killed by a shark at Tathra Beach in April last year while swimming in the morning.
Sharks are a regular feature in Australian waters and swimmers and surfers have had their share of encounters with the animals this summer.
Fatalities, however, are rare, although two teenagers died in shark attacks in December, one on the country's west coast and one on the east.
Experts say attacks by sharks are increasing as water sports become more popular.
- AAP, AFP, AP, nzherald.co.nz
