Fire and Emergency NZ said it was called to the already large fire about 2:10pm on Sunday.
Nearby residents were advised to close their doors and windows.
Photos and videos posted on social media showed an enormous plume of black smoke visible from across the lake.
A deluge of posts to an online community page said they could see flames or smoke coming from the school, on Sunday afternoon, while photos showed a large black plume of smoke rising from the town.
"N block fully ablazed ash is coming down all over Motutahae Street," one person said.
"A significant amount of the school has already burned down," another said.
Local MP Louise Upston said in a Facebook post the news was "devastating".
The school is on Spa Road, at the north east end of the town.
Firefighting crews from the Lake Taupō, Taupo, Kinloch, Rotorua, Tokoroa, Greerton, Tauranga and Kaingaroa stations were responding.
"School will be closed Monday 9 February as a result of the N block fire. Please do not come onsite," a message sent out by the college said.
