Mt Tongariro is being monitored by Civil Defence but the Prime Minister's indicating there's no great need for concern at this stage.
Authorities are on heightened alert after the mountain's first eruption in 100 years.
The eruption's described as small and was centred at the Te Maari craters.
John Key says it's the first activity on the mountain since the 90s so it's a case of watching to see whether it develops.
"Civil Defence and others will continue to monitor the situation and if we believe it presents more significant risks then obviously we'll make sure that everyone's well and truly notified of that."
People living near Lake Rotoaira, at the southern end of Lake Taupo, reported the eruption to police about 11:50pm last night.
Do you have photos or video of the eruption and the ash? Email firstname.lastname@example.org
GNS Duty Volcanologist Michael Rosenberg eye witnesses reported seeing red hot rocks coming out of the crater lakes on the north side of Tongariro and ash falls up to five centimetres deep on both the Desert Road and State Highway 46.
Tongariro's activity alert has been raised from one to two on a scale with the highest number five - that means a small eruption is underway.
However the Civil Aviation alert has been raised to red, telling pilots there is ash being thrown into the air.
Michael Rosenberg says they raised the alert level on Tongariro about two weeks ago, after a series of small earthquakes under the mountain.
But he says those quakes had become smaller and fewer so they thought activity had declined.
"Unfortunately it's not possible to predict what these eruptions are going to do and certainly in this case with the eruptions being so unexpected all we can do is monitor very closely."
Mr Rosenberg says it was a fairly small eruption but they're watching it very closely to see what happens next.
He says there's no connection between the eruption on Tongariro and the increased activity at White Island.
GNS scientists are flying over Mount Tongariro now to see how the mountain is looking.
Ruapehu Area police commander Steve Mastrovich says once they hear back from the scientists, they'll have a better idea of what shape their response will take later this morning.
He says search and rescue volunteers have flown onto the mountain to check if anyone's caught in tramping huts.
"We haven't encountered any difficulties with anybody, haven't encountered anybody in fact so that seems to be ok, there's nobody in any particular danger on the mountain," he told Newstalk ZB's Mike Hosking.
Mr Mastrovich says the section of State Highway One between Rangipo and Waiouru, which was closed by ash after the eruption, has reopened.
State Highway 46 across the northern face of the mountain, west of Rangipo has now reopened.
No evacuations but warning over ash
While Civil Defence has not ordered any evacuations, a number of families have voluntarily left their homes.
Taupo District Council emergency manager Phil Parker says until they know more, there's no need for residents to evacuate.
"There's nothing that's causing us any concern at this stage and the way the weather forecast looks I don't think it will so it's really just a monitoring situation that we're in."
Mr Parker says they believe the mountain has quietened down for now.
The biggest problem today is expected to be the ash which is five centimetres deep in some areas near the mountain - and has fallen as far east as Napier.
Civil Defence says a sizable fine ash cloud is dispersing across Hawke’s Bay, and particularly in the north-west of the region.
A layer of ash approximately one millimetre in depth has fallen inland from Napier and north-east into the Wairoa area.
There's also a noticeable sulphuric smell in the air around Napier-Hastings.
Reassurances there's no health risk to the wider community as a result of ash from the Mount Tongariro eruption.
Police say currently the risk is only minimal and confined to people in the vicinity of the eruption who may suffer from respiratory issues.
Hawke’s Bay Emergency Group Controller Ian Macdonald says people with respiratory issues in areas where ash is falling should stay inside.
Civil Defence spokesman Vince Cholewa says ash could also reach those living in Waikato, Hawke's Bay, Gisborne, Manawatu-Wanganui, Bay of Plenty and Taranaki.
Mr Cholewa says at this stage not all areas alerted are affected by ash, but that situation could change.
"We're working actively with GNS Science who operate the monitoring equipment on the mountains, and with police so all the information from the ground is being gathered, and decisions will be based on that information.
"Evacuations have not been ordered, please listen to the radio for advice from local authorities and police, any evacuations would be issued at that level, and based on the evidence from GNS Science."
Wind is blowing ash in the opposite direction of the ski-fields, meaning Whakapapa and Turoa remain open.
Mountain Manager Chris Thrupp says they'll be keeping an eye on the situation.
"We've had no advice from outside agencies, the Department of Conservation, police or GNS Science that we should do anything other than operate normally."
Federated Farmers says the eruption has had minimal impact on farms in the area.
A spokesperson says there’s relief the eruption is not as bad as it could be, and ash fall has been limited to forests near the central plateau.
It's preparing details on how to cope with any further eruptions.
Flights affected by eruption
Newstalk ZB understands all flights in and out of Gisborne this morning have been cancelled due to the ash cloud.
Air New Zealand says flights operating in and out of Rotorua, Taupo, Napier and Palmerston North may also be delayed or cancelled.
Chief Pilot Captain David Morgan says Air New Zealand's will make adjustments to flight routes to make sure aircraft stay clear of any ash.
David Savage hoped to fly to Wellington for a meeting, but his flight and all others scheduled for this morning have been cancelled due to the ash.
He's been told by Air New Zealand they'll review the situation this afternoon.
Dozens of flights in and out Auckland Airport have been affected by the ash.
In all, there's been 20 flight cancellations and 22 delays in and out of the domestic terminal there.
Airways spokeswoman Philippa Sellens says planes can avoid the ash.
"There is absolutely no threat to airplanes flying, we will take them on a flight path around or above the ash cloud, we will certainly have a very wide safety margin."
The Civil Aviation Authority's confident the ash will clear later this evening, and any disruptions to flights should be confined to this morning.
Civil Aviation Authority manager of meteorology Peter Lechner says the ash plume is leading off to the east and south east.
"Flight operations to the west of the plume should remain unaffected, however operations to the eastern half of the North Island will have some difficulty at this stage."
Mr Lechner says a frontal system is on its way which should disperse the cloud, but that depends on whether there are further eruptions.
The owner of Rainbow Motel in Tokaanu, Ann Lambert says it was the noise that got her out of bed.
"All I could see was this huge plume sitting in the middle there with sparks and things flying out of it and I wondered what on earth was going on."
Ms Lambert says at first she thought the noise was a truck was going by, but the rumbling just kept going.
"I thought it was Ruapehu but I was surprised that I could see it because it's further away and we wouldn't have been able to see it from here so clearly because this looks so very close, so when I heard it was Tongariro that all made sense."
Ohakune Police Detective Graham Parsons says he was alerted to the activity late last night.
"I went out and initially I couldn't see anything but soon after that I saw a red flash across the sky, it was obviously towards the Tongariro direction, and that was all we could observe from Ohakune."
Graham Parsons says although things are moving as normal in Ohakune this morning, police will be keeping a close eye on the mountain's activity.
Photo: The ash cloud this morning (@richardshype)