Tourist boat destroyed ... the White Island Tours' boat ‘Peejay IV’.

All 60 people were forced overboard after the vessel “PeeJay” caught fire as it was returning from White Island to the town of Whakatane.

It is understood the boat’s motor caught fire and blew up.

All 53 passengers and seven crew members were forced overboard to escape the fire and smoke.

Police spokeswoman Kim Perks said three people were taken to a local hospital after suffering from minor injuries and smoke inhalation.

All passengers and crew survived. A 47-year-old female from South Australia, a 23-year-old female and a 36-year-old male - both from Ohope - are reported to be in a stable condition, Stuff.co.NZ reports.

Perks said the boat was about one kilometre from shore when authorities were first notified of the incident, and they called on nearby boats to assist.

She said the PeeJay crew then sent a mayday to say they were abandoning ship.

Perks said four charter vessels and the New Zealand Coastguard were able to get the scene quickly and rescue everybody. She said the PeeJay later sank.

White Island, 50 kilometres off the North Island coast, is volcanically active and popular with tourists.

White Island Tours, which operated the tourist boat, was not immediately available for comment.