UPDATED 5.16PM Skeletal remains found dumped in bush in the foothills of the Tararua Ranges are suspected to be missing Levin man Palmiro Macdonald.

Police have revealed bones were found during a search of the Mangahao Dam area, near Shannon, Manawatu, yesterday, following information from a member of the public.

Today a police source said there was a "good chance" it could be the missing Nomad gang associate, last seen in March.

However, this was not confirmed, and extensive scientific testing was needed to determine identity.

Late this afternoon, about 4.30pm, police said forensic tests were ongoing and they were yet to establish whether or not the remains belonged to Macdonald.

Central District crime manager Detective Inspector Ross McKay said: "Given that we've yet to locate him, it has got to be a possibility that it's Palmiro Macdonald.

"However, there are other unsolved cases of people who've been reported missing in this area over the years.

"Until the forensics are completed - which could take days - we can't confirm the identity of the deceased."

Police said in a statement that Macdonald's family had been made aware of the developments.

Specialist search groups are at the scene today and the area is cordoned off.

Macdonald, also known as "Powser", was picked up from his home in Levin on March 23 by an associate driving a 1994 Mercedes Benz. He has not been seen since.

On the day police officially announced an investigation into his disappearance, a Hokio Beach house he regularly visited was torched.

Police made a fresh appeal last month on the Police Ten 7 TV show for information to help solve what happened to Macdonald to provide answers for his family.