The Loafers Lodge hostel in Newtown, in Wellington's south, caught alight overnight, prompting an evacuation.

Fire and Emergency New Zealand said "a number of people" were unaccounted for but is yet to confirm any deaths.

Privately, officials are bracing for dozens of fatalities.

"This is a tragic event for all involved. My heartfelt condolences go to the loved ones of those who have lost their lives," FENZ district manager Nick Pyatt said on Tuesday.

"It doesn't get worse than this.

"This is a once-in-a-decade fire for Wellington. It's the worst nightmare for us."

Some 52 people were taken out of the building after being notified of the blaze at 12.25am.

More than 10 fire vehicles responded to the emergency across the morning and the fire was put out after 6am.

"It's a really concerning development and obviously our thoughts will be with all the firefighters involved and all the victims of the terrible tragedy that's unfolding," NZ Prime Minister Chris Hipkins told local television.

There were no vacancies in the accommodation complex, except for a number of rooms being treated for bedbugs, Radio NZ reported.

The hostel was also used for transient housing.

Australian Associated Press