They have also reported bright red rocks flying out of the mountain.
The eruption reportedly happened at the Te Mari Craters, which are close to the Ketetahi Hot Springs on the northern side of the mountain.
Civil Defence says the volcanic activity could pose a threat to the Waikato, Hawkes Bay, Gisborne, Manawatu-Wanganui, Bay of Plenty and Taranaki regions.
A warning was also issued at 1.45am to people in these affected areas saying residents should stay indoors since volcanic ash is a health hazard.
It said:
• Residents should stay indoors, especially anyone suffering from breathing difficulty.
• Close all windows and doors to limit ash getting in.
• If outside, seek shelter.
• Wear a dust mask or handkerchief over nose and mouth if caught in an ash fall.
Due to possible danger to the public the police have closed SH1 between Rangipo and Waiouru (Desert Road) and SH46 west of Rangipo. SH47 and 4 remain open at this stage as does SH5.
Motorists are being advised to avoid travel in the area and these closures will be re-assessed once daylight reveals the extent of the ash cloud.
The national aviation advisory says that flights between the east and west of the North Island are the most likely to be affected by the ash cloud.
Police are sending search and rescue teams up Mt Tongariro at first light to check no one is stranded in huts. However, they say there have been no reports of injuries or damage.
The Ministry of Civil Defence & Emergency Management (MCDEM) is currently assessing information with the assistance of GNS scientific advisors.
It has not yet activated the National Crisis Management Centre which is called upon in times of emergency like the Christchurch earthquake.
New Zealand's other high profile active volcano, White Island, also had its alert level raised from 1 to 2 on Monday after a small eruption was recorded in its crater lake.
- HERALD ONLINE