Emergency services were called to the shrub fire around 3.30pm today.
As firefighters worked to find access into the site the blaze quickly spread with flames licking the tops of the tallest trees in the area.
Fire Service central-lakes assistant area commander Hamish Smith said the flames spread between 500m to 1km, gutting many smaller trees and surrounding bush.
"It is hard to say how high the flames were getting or how far they spread because we were just focused on getting them contained.
"I wouldn't know what has caused it. The area is high in sulphur so it could have just been a sulphur fire but we don't know yet."
About five fire appliances from Rotorua attended the scene accompanied by two rural fire crews from Okareka, one crew from Ngongotaha and two hazardous chemical appliances.
Two helicopters with monsoon buckets joined the efforts after ground crews struggled to contain the flames in its remote location.
Police were stationed along Te Ngae Rd regulating the traffic and ensuring people didn't linger on the side closest to the flames.
Rotorua's Avon Scandlyn said she saw the smoke from Fenton St and went to investigate. "When my husband saw smoke billowing from this way we thought we'd better go check it out in case it hadn't been reported."
Mrs Scandlyn has lived in Rotorua all her life and said there had been a few fires in the area in the past. "I think the area dries out very easily and after a few days of no rain it's quick to set fire. "It's a good thing it's not so windy today because it would be spreading 10 times as fast.
After about half an hour vehicles started parking along the side of the road to watch firefighters work to contain the blaze.
Motorists, cyclists and pedestrians frequently stopped to take videos and pictures of the flames. Nadine Davis stopped to watch the fire after seeing the smoke from Countdown on Fenton St. "At first it was just wispy white smoke but then after about five minutes I started to see black plumes wafting up. "There have been fires around this area before but I've never seen one as close to town as this.
The Rotorua Daily Post received reports of burnt leaves and ash falling in Lynmore. The fire could be seen from around the district.
A northern fire communications spokesman said the fire is being investigated.
A helicopter is about to join in the efforts to put out a major fire near Sulphur Point. About six fire appliances are at the scene and a helicopter with monsoon bucket is about to take off.
Police are advising people to stay away from walking tracks around Sulphur Point where a large fire has broken out. Senior Sergeant Malcolm Collins of the District Command Centre said the fumes had the potential to be poisonous and they were asking people to stay away from the tracks.
He said the fumes were "okay at the moment" and the wind was blowing them away from the road. Several cars had stopped along Te Ngae Rd to watch the blaze but traffic was flowing at the moment. About eight police were at the scene.
4.30pm: Firefighters are attending a fire near the Sulphur Point walkway, between Puarenga Park and the Sudima Hotel.
A reporter at the scene said "heavy smoke" and flames could be seen from Te Ngae Rd.
One lane of Te Ngae Rd is partially closed for traffic heading east.
- Rotorua Daily Post