Filming of Ghost TV started this week at the former Seacliff psychiatric hospital.
Ghost TV was created by veteran Dunedin filmmaker Phil Davison, whose previous credits include Kung Fu Vampire Killers and Belief.
Mr Davison has lectured in film at the University of Otago, Otago Polytechnic and the Southern Institute of Technology and is also a martial arts teacher.
The movie is being shot in the ruins of the former Seacliff Psychiatric Hospital, where patients as diverse as author Janet Frame and racial murderer Lionel Terry were interned.
"Seacliff must be one of the creepiest places in the country. The main building is long gone, but the remaining buildings are a perfect set for a horror film," Mr Davison said this week.
"The film is an update on the classic haunted house movies, mixing plenty of digital technology with good old-fashioned suspense and scares."
The film is about a fictional reality television programme called Ghost TV, which is filming in the haunted ruins of Seacliff.
"But things do not go to plan. One of the crew is not very emotionally stable, and when she discovers that she has been used callously by another crew member, she snaps and runs off into the night, only to return with violent intent," he said.
"On a deeper level, the film is a tale about people without a moral compass. It's always a lot more scary when you care about the people involved, so, in this script, we work on setting up the characters so that when they are endangered it means a lot more."
The cast includes Melissa Hobbs, Harley Neville, Dell McLeod, Leah Carrell and Adam Thompson. The film has been funded by the Southern Institute of Technology and filming is expected to be completed before Christmas.
Filming of New Zealand Film Commission-funded horror film I Survived a Zombie Holocaust starts at the Truby King Reserve in Seacliff in March.
