A bar at the back of the building was filled to capacity when a gas bottle on a barbecue exploded, causing a large fire.
About 300 people were evacuated .
Kiwi House said nobody appeared to have been injured in the fire.
New Zealand Olympic Committee spokeswoman Ashley Abbott said there were no reported injuries.
"After people had been evacuated, a gas bottle subsequently exploded," she said.
She said the gas bottle was a small one of the sort typically used for backyard barbecues.
New Zealander Luke James, who was in the bar, told TVNZ he saw smoke and people suddenly running from the building.
"There were flames and a bang and people were screaming and running and literally it was like a bomb going off".
He said it was scary because it took no time for the place to be engulfed in flames.
"Everyone was jumping over the fence - it was madness, pandemonium."
Another witness, named Clinton, said the gas canister blew the door and roof off the barbecue area.
He said he feared for his life.
"When we were being evacuated out you could actually hear the gas canister hissing. There were no flames, just a lot of smoke and the gas canister hissing.
"Then all of a sudden boom - it was like somebody throwing a lot of petrol on the fire. And then about 15 seconds later, bang, the roof disappears and the floor disappears.
TVNZ reporter Andrew Potter was near the bar.
"There were hundreds of Kiwis in there watching New Zealand's hockey game and waiting for other Olympic sports to watch on the big screen, then completely without warning a barbecue at the back of the bar on the outside section of the bar appears to have erupted in flames and within seconds the entire pop-up bar was in flames sending hundreds of young Kiwis running out trying to get away."
Potter said the intense flames reached two storeys high but the evacuation was orderly.
"All these Kiwis, and mostly young Kiwis who were watching the Olympics are standing about 40 to 50 metres away from the scene watching in disbelief."
Potter said the pop-up bar had burned to the ground.
Herald Online's social media editor Troy Rawhiti-Forbes, who was at the scene, said another witness praised the venue's staff for maintaining an orderly exit.
"She said the staff organised two lines and escorted them off the premises, 'really quick and really clean'."
The fire service had the fire under control and there didn't appear to be any damage to the Kiwi House building itself.
Kiwi House tweeted about the incident: "We've had a rather large fire engulf the outdoor bbq area. Everyone is ok. We're closed till further notice. More updates as they happen."
Just before the fire the bar had tweeted about the exciting hockey game between the Black Sticks women and the Netherlands.
Bystanders described the fire on Twitter:
"Blimey, stood at barbie when huge fire at kiwi house began, looked like everyone got out, all safe," Aly Duncan (@alyduncan) wrote.
Andy Scott (@Andrew-Scott) saw the fire start. He said on Twitter one of the gas hoses to the barbecues caught fire. It was followed by three to four explosions.
"No injuries at @KiwiHouse2012 for those asking, everybody seemed to get out quickly," Mr Scott wrote.
