All people in the house have been accounted for and ambulance services were stood down.
A photographer at the scene said a column of "thick, black smoke" was seen coming from the house.
A reporter said there was a lot of smoke and the air was hazy.
Fire crews from Lake Tarawera, Lake Okareka, Rotorua and Ngongotahā were on scene.
The road was closed from about 230 Spencer Rd.
Fire crews at the scene. Photo / Andrew WarnerA Tarawera resident said she woke up to a phone call from her best friend in Auckland, asking her to check on their house.
"Their house is right next to the one that's burning.
"They're frantic."
Fire at a Spencer Rd property at Lake Tarawera. Photo / SuppliedMore to come
.