The group is inviting writers aged 16 years and over in Otago and Southland to write 500 to 600 words of original fiction on the theme of "earth and water".
Entries will be judged by Carl Nixon, a Christchurch playwright, short-story writer and novelist, who has won several awards, including the Katherine Mansfield Short Story Competition.
Winning entries will be published in the Queenstown Times.
A selected number of stories will also be published in a booklet which will be available to order at the prizegiving ceremony.
"We work on a variety of projects in addition to our fortnightly meetings, and I thought [the competition] would be a good focus for the group, raise its profile and add something to the cultural calendar of Queenstown," group founder, co-ordinator and author Caroline Early, of Queenstown, said.
"We're starting off small and simple for our first one. The longer-term thinking is to make it annual, or biennial, and to expand it into a children's category and make the prize-giving more of a literary event.
"I think Queenstown is very focused on its outdoor activities and sports activities, and perhaps there's not so much of a buzzing cultural life, so I thought it would be nice to be a bit more creative."
Ms Early said each competition entry cost $5 and there was no limit to entries per person.
A total of 500 entry forms will be distributed around bookshops, cafes and galleries in the resort this week.
Completed forms, cheques and hard copies of the stories were to be mailed to PO Box 830, Queenstown, by Thursday, September 30.
The first prize is $300 and there will be two merit prizes of $200 each.
The prizegiving will be held on Sunday, October 31.
Mr Nixon was expected to attend.
The inaugural competition was sponsored by United Water and the Central Lakes Trust.
The Queenstown Creative Writing Group has a core of 10 members and meets every fortnight at Halo cafe in Queenstown.
The next meeting will be held on Wednesday, September 1, at 6pm.
