A large fire caused by an explosion at a Taupo factory has been extinguished after an hours-long battle by fire crews.

The fire at NZ Timber Packaging Ltd erupted about 8.30pm on Monday, reports Stuff.co.nz.

Fire service northern communications shift manager Scott Osmond says the blaze was out by about midnight.

While the exact cause is not yet known, there have been reports of an explosion before the fire took hold.

A fire safety investigator was at the site overnight and is expected to return to the scene this morning.

Scott says a couple of fire trucks remained at the scene in the early hours this morning, "keeping an eye on it.

At the blaze's peak, eight crews, plus support units, were at the scene, including units from as far as Rotorua and Tokoroa.

The fire spread over an area of about 30 metres by 30 metres, and flames could be seen shooting up metres in the air at the factory.

Crews battled to salvage a cyclone tower storing sawdust and stacks of timber.