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A Fire and Emergency NZ spokesperson said at about 8.30pm the fire was largely contained but not yet extinguished.
At its peak, about 40 firefighters and nine fire trucks were actively fighting the fire, though that number had now reduced, the spokesperson said.
Earlier, thick black smoke pouring into the sky from the fire in Lake St could be seen from kilometres away.
"People may still see smoke coming from the area, and we want to let people in the path of the smoke plume know that it is not toxic - it is similar to the smoke from a vegetation fire," Fire and Emergency incident controller Julian Tohiariki said.
"However, inhaling any smoke is hazardous to your health, so we encourage anyone encountering the smoke to stay indoors with their windows and doors closed."
Senior Constable Colin Johansen, of Invercargill, said as far as he was aware no people had been hurt and all staff had been evacuated immediately.
The building on fire belonged to Freight Haulage, he said.
A Fenz spokesman confirmed the building contained palm kernel, used as stock feed.
The company describes itself as the largest transporter of containerised goods in Southland, with over 40 years experience in freight handling.
Police had closed off Lake St, and fire crews were working from inside the cordon.
The Bluff Highway (State Highway 1) will remain closed throughout the night.
Staff from the building on fire had been evacuated but remained on scene.
The smoke smelled like nothing she had encountered before, and was similar to sulfur, she said.
A Fire and Emergency New Zealand spokeswoman said crews from Invercargill and Kingswell stations were called to an alarm activation about 4.25pm.
As they responded, 111 calls were received indicating the building was on fire and the smoke was visible to crews.
Further appliances were called for, and upon arrival the fire was discovered to be a building 50m by 30m which was well alight.
Six fire engines were now in attendance, as of 5pm, along with a command unit from Invercargill.
Drivers were being asked to avoid SH1 in the vicinity of the blaze.