Around 50 people, including cruise passengers and foreigners, were believed to be on or around White Island at the time it erupted. Police said 23 have come back.
"I can confirm there is one fatality," said deputy commissioner John Tims. "There is a number still remaining on the island who are currently unaccounted for," he added.
"At this stage, it is too dangerous for police and rescue services to go to the island."
The eruption occurred at 2.11pm (0111 GMT), thrusting a thick plume of white ash 3.6km (12,000 feet) into the sky.
Prime Minister Jacinda Ardern confirmed some of those caught up in the disaster were foreigners. "We know that there were a number of tourists on or around the island at the time, both New Zealanders and visitors from overseas."
Police indicated there had been no contact with any survivors and injured still left on the island and with nightfall close at hand, they face the prospect of a long night waiting for rescue.
There were particular fears for a group of visitors seen walking on the crater floor moments before the eruption occurred.
Cameras providing a live feed from the volcano showed more than half a dozen people trekking inside the rim before images went dark.
Others, including tourist Michael Schade, made it off just in time and were able to capture footage of the devastation.
His videos showed groups of startled tourists clustered by the shoreline, waiting to be evacuated as the ground around them smouldered, the sky filled with white debris and an ash-caked helicopter lying damaged nearby.
Further in the distance, the caldera was virtually invisible, shrouded by a thick bank of ash.
Volcanic Air said they had landed a helicopter on the island shortly before the eruption carrying four visitors and one pilot. All were now accounted for.
"It had landed on the island. What happened after that we don't know, but we know that all five made it back to Whakatane on one of the tourist boats," said a company spokesman.
Royal Caribbean cruise company said "a number of our guests were touring the island today" from the Ovation of the Seas, a 4,000-capacity ship carrying many nationalities.
"My understanding is that the tour party was round about 30 people from the cruise ship 'Ovation of the Seas,'" Kevin O'Sullivan, chief executive officer of industry body the New Zealand Cruise Association said.The company did not confirm that figure.
Guillaume Calmelet, the co-director of Skydive Tauranga, saw the eruption from above as he took a customer on a tandem skydive from a plane 12,000 feet above the Bay of Plenty.
"As soon as the parachute opened there was this huge cloud that was really different to whatever we've seen before," he told AFP. "I could see it coming out in freefall, so probably about 30 seconds for the whole cloud to form, if that. It was pretty quick."
The country's National Emergency Management Agency described the eruption as "moderate", although the plume of ash was clearly visible from the mainland and from satellites flying overhead.
"We have seen a steady decline in activity since the eruption. There remains significant uncertainty as to future changes but currently, there are no signs of escalation."
White Island -- - also known as Whakaari -- is about 50 kilometres (30 miles) offshore in the picturesque Bay of Plenty and is popular with adventurous tourists willing to don hard hats and gas masks.
White Island is New Zealand's most active volcano cone and about 70 percent of it is underwater, according to government-backed agency GeoNet.
Around 10,000 people visit the volcano every year. It has erupted frequently over the last half-century, most recently in 2016.
In August of that year the New Zealand Defence Force airlifted a 2.4-tonne shipping container onto the island to serve as an emergency shelter in case of an eruption.
"Sudden, unheralded eruptions from volcanoes such as White Island can be expected at any time," said University of Auckland volcanologist Shane Cronin.
"The hazards expected from such events are the violent ejection of hot blocks and ash, and formation of 'hurricane-like' currents of wet ash and coarse particles that radiate from the explosion vent."
"These can be deadly in terms of causing impact trauma, burns and respiratory problems. The eruptions are short-lived, but once one occurs, there are high chances for further, generally smaller ones as the system re-equilibrates." - AFP
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