The explosion, which left six others injured, happened as contractors were working to connect a new watermain to an existing one at the intersection of Mt Smart Rd, Victoria St and Athens Rd in Onehunga, Watercare Services chief executive Mark Ford said.
"This is a very dark hour for us - many of the crew on site are like family to us, and my heart goes out to all of those affected by what has happened."
District commander for Auckland City superintendent George Fraser said gas levels remained high in the area.
"The cause of the explosion is still unclear and gas levels remain high, restricting access to the area.
"Emergency services remain at the scene and air is being pumped into the space in an effort to make it safe so that a thorough scene examination can be carried out and to enable the maintenance work to continue as scheduled."
Emergency services would work through the night to investigate how the explosion occurred, Mr Fraser said.
A police spokeswoman told NZPA it was still not known what type of gas caused the explosion and how it got into the area.
Mr Ford said before the explosion a section of one pipe had been removed about 7.15am in preparation for the connection.
Shortly after the team with confined space training had entered the excavated area to inspect the work, then the explosion occurred.
"We are not in a position to say at this stage what caused the explosion however we are working closely with the contractors and all the authorities, including the police, fire service and the Department of Labour," Mr Ford said.
The pipes were 1.9m in diameter.
One of the injured men was in a critical condition, two were stable and had been transferred to a ward and the other three had been discharged, an Auckland City Hospital spokesman told NZPA.
Two men were reportedly blown out of the tunnel. One man was believed to have lost limbs.
Director of trauma services Ian Civil said the injuries sustained by the workers were a combination of puncture wounds, blunt injuries caused by striking objects and blast injuries from a pressure wave which from the explosion, One News reported.
It was still "too early to say" whether the critically injured person would make a full recovery, Mr Civil said.
"It's always hard to tell the degree of recovery patients who have critical injuries are going to make and there is obviously physical and psychological recovery that needs to be considered."
Eyewitness Ray Tema said he saw the first man brought out from the site after the explosion.
"At first I thought he was gone but then I started hearing him screaming, so he was in a lot of pain and he had knees up, legs gone," he told One News.
"[I was] just terrified - first time something like that happening around here," Mr Tema said.
Lisa Hennessy, who lives near the site, said she and her husband were woken by the windows in her house shaking.
"My fiancé was in Christchurch in February when the earthquake struck and he said that the sound we heard was very similar to what he heard before the ground started shaking, " she said.
Watercare this afternoon urged Auckland residents to conserve water as a precaution.
A Watercare spokeswoman told NZPA they were waiting for the go ahead from the Fire Service before resuming work on the pipes.
Auckland mayor Len Brown this afternoon expressed his commiserations to the family of the woman who died.
He also said he stood in support of Watercare, which is owned by Auckland City Council, saying it was a "great company".
Auckland fire acting area commander Steve Lakin said fire fighters were testing gas levels and working to make the area safe.
