UPDATE 6.25pm: A total of three people are now being treated at hospital after a dramatic sea rescue off the coast of Whakatane this afternoon.

Bay of Plenty District Health Board communications manager Diana Marriott says two women and a man were in a stable condition after the incident which happen about 3.45pm today.

Fire rages aboard the stricken charter launch Peejay 5.

A 47-year-old female from South Australia, a 23-year-old female and a 36-year-old male both from Ohope were being treated in Whakatane Hospital. The two Ohope residents weren't related Diana says.

UPDATE 5.08pm: Police have confirmed two people have been taken to hospital after a dramatic rescue off the coast of Whakatane this afternoon.

Police say at 3.45pm emergency services received reports of a ferry on fire. A police spokesperson says there were 57 passengers and crew on board at the time.

'The blaze took hold of the vessel forcing those on board to jump into the water. A Coastguard boat and a number of small local vessels went out to assist in recovering passengers and crew from the water.”

The spokesperson says a helicopter carried out a sweep of the water to confirm everyone had been rescued.

'The passenger manifest has been checked against those rescued from the water and everyone is accounted for.

'One person has been taken to hospital suffering from smoke inhalation and one for and a minor injury caused by jumping from the boat.”

UPDATED 4.40pm: Charter boat, the Whakatane-based Pee Jay 5 caught fire about a kilometre offshore from Whakatane this afternoon with 53 passengers and seven crew on board.

A massive rescue operation off the coast is understood to have saved all aboard.

Smoke from the fire on the boat can be clearly seen on the Whakatane Coastguard web cameras.

Whakatane Coastguard has been ferrying people from the burning vessel to shore. As at 4.35pm all passengers and crew are believed to be accounted for, according to the NZ Fire Service Northcoms.

The fire started in the boat's engine room as the Peejay 5 was believed to be returning from White Island.

Pee Jay 5. Picture: Supplied.

The boat is described as a 75 foot luxury launch purpose-built for the White Island tours. The launch contains upstairs and downstairs indoor seating and outdoor seating with excellent views.

The trip to White Island normally takes about 90 minutes with tour operators giving commentary and the opportunity for spectacular photos.

Reports from Whakatane locals say the town is full of smoke.

Whakatane District Council have posted on their Facebook page asking members of the public if anyone in the area can spare blankets, to take them down to the cordon set up on the road to the Whakatane Heads.

The conditions are rough and the visibility is poor.

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