Tourists were seen walking inside the rim of the White Island crater just moments before the eruption.
Police said at least one of those evacuated from the island volcano has been critically injured.
White Island, or Whakaari, is off the coast of North Island – and is one the country’s most active volcanoes.
Despite that, the island is a tourist destination with frequent day tours and scenic flights available.
A live feed from the volcano showed a group of visitors inside the crater before images went dark after the eruption.
“While it was initially believed there were approximately 100 people on or near the island at the time of the eruption, we now believe there were fewer than 50,” police said.
“Some of those people have been transported to shore, however a number believed to be on the island are currently unaccounted for.
“Of those transported to shore, at least one has been critically injured.”
The eruption began around 2:11pm local time (01:11 GMT), throwing a thick plume of white ash and smoke into the air.
The country’s National Emergency Management Agency said a “volcanic eruption is occurring at White Island and is hazardous in the immediate vicinity of the volcano”.
Geological hazard monitoring website GeoNet said monitoring equipment on the volcano suggested there were “no signs of escalation”.
Police are warning people living near the area to “be aware of the potential for ashfall” and to stay indoors.
White Island has seen several eruptions over the years – but none while people have been in the area.
It saw a short-lived eruption in 2016 and several between 2012-2013. The explosive eruptions saw volcanic ash emitted, landslides and new craters forming.
Between 1975-2000 White Island was in eruption – its longest eruption period, according to GeoNet.