The balloon went down in fine weather near Carterton, a small town just north of the capital Wellington and a popular area for hot air ballooning.
| A hot air balloon is shown in Germany. All 11 people on board a hot air balloon, which crashed near the town of Carterton in New Zealand Saturday morning, were killed, media reports said |
"It appears a fire has ignited on board, causing the hot air balloon to crash in farmland. Sadly, the pilot and 10 passengers onboard have not survived," Wellington district police commander Mike Rusbatch said.
"This is an absolutely tragic incident and our thoughts are with the families of the deceased."
One witness, David McKinlay, told reporters he looked up to see one side of the basket on fire and "all of a sudden there was just 10 metres of flames".
"It was like a rocket coming down; it was just unbelievable," he said.
McKinlay, who alerted the emergency services, said the balloon was about 150 metres in the air when it plummeted to the ground.
Another witness told Fairfax News he was looking out of his window when he saw the balloon appear to hit a power cable.
"The people were enjoying a nice ride and by the looks of it they clipped a power wire," he said.
"Then I heard the screams and looked out the window and heard it coming down. They sounded like screams of joy but they weren't. It wasn't coming from a great deal of height.
"I ran down the road to see if I could help but by that stage it was too late. It was just burned out. By the time the emergency services got there, there wasn't much of a chance."
Two of the passengers are believed to have leaped from the burning basket and were found in a nearby paddock.
Jacqui O'Connor, a nurse holidaying in the area, said she raced to the scene, dodging fallen power lines to reach the victims.
"There was live wire all (around)," she said.
Police say they were first alerted to the tragedy at 7:26 am (1826 GMT Friday). Ballooning companies in Carterton, about 150 kilometres (95 miles) north of Wellington, recommend early morning flights.
Reporters at the scene said the crash site has been cordoned off and only emergency workers and the families of those on board the balloon are being allowed through.
The names and nationalities of those on board have not been released but Carterton Mayor Ron Mark said he believed they were a mix of locals and tourists.
Transport Accident Investigation Commission spokesman Peter Northcote said an investigation is already under way to determine the cause of the disaster and draw up recommendations to prevent future accidents.
Hot air ballooning is tightly governed in New Zealand with operators requiring special certification.
Two years ago, the civil aviation authority banned one company after "serious safety concerns" were uncovered in safety audits and spot checks.