In a statement released this afternoon, the Australian Department of Immigration and Border Control said the rioting had been led by a group whose visas had been cancelled. It did specify which countries the rioters were from.
Mr Key said today: "My concern would be that like a riot at any Corrections facility, there can and may well be consequences as a result.
"These are people who theoretically are staying on Christmas Island, choosing not to come back to New Zealand because we know under the advice we've had from the Australian Government they could do that.
"Now the risk is they actually damage their own appeals because they undertake other criminal activity while they are there."
Mr Key said he had been advised that around a third of appeals by New Zealanders had been successful. Australia has committed to speeding up the appeal process and to prioritise New Zealanders.
Labour Party corrections spokesman Kelvin Davis, who visited the island last month, wanted New Zealand to send officials to the detention centre.
Mr Key ruled this out, saying the Government was already providing support to detainees and would help them come back to New Zealand if they wished.
He reiterated that anyone who chose to come back to New Zealand would not damage their chance of a successful appeal.
Mr Key would not be speaking to Australian Prime Minister Malcolm Turnbull about the issue, saying he would not expect an approach from his counterpart if Australians were caught up in a riot at Paremoremo Prison.
"What we do say that if they have concerns, they should contact us.... It isn't like they don't have access to cellphone capability."
Mr Key said the Government had given its "utter commitment" to follow up on any complaints from detainees who said their human rights were being abused.
The Department of Immigration and Border Control rejected reports of a wide-scale riot, but said the situation remained "tense" and some staff had been withdrawn for safety reasons.
Rioting starting when a group of Iranian detainees were carrying out a peaceful protest following the death of an Iranian asylum seeker, the statement said.
The department said rioters "took advantage" of a peaceful protest by Iranian detainees to engage in property damage.
They had lit "a number of small fires" at the detention centre and damaged medical, educational and sporting facilities.
No staff or detainees had been injured, the statement said, and the department was attempting to resolve the situation "in a peaceful and safe manner".