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A police spokeswoman said they were informed about the fire in Atley Rd, Arthurs Point, at 11.45am.
The fire was in a workshop next to a house and was "well involved".
The workshop was next to a tree plantation and police had been told a helicopter may be called in to help fight the blaze.
A Fire and Emergency New Zealand spokesman said five crews were involved in fighting the blaze, he said.
There had been no reports of injuries.
An Otago Daily Times reporter at the scene said smoke was still pouring from the property about 12.15pm, but the fire had largely been contained by 12.30pm.
There was significant damage to one part of the building on the property.
Three police cars were at the scene.