A firefighter at the scene said the source of the fire was believed to be a big pile of rubber.
Fire and Emergency New Zealand shift manager Simon Lyford said emergency services received multiple calls at 10.58am reporting black smoke in the area.
Initially, two appliances from Invercargill fire station attended the scene.
''On arrival, they found a well-involved fire which was threatening some neighbouring structures so they triggered a second alarm,'' he said.
''They are working to extinguish the fire. It seems is a 4 metre by 5 metre [area] and they are working to extinguish it with hoses and foam.''
Parts of Islington St and Tay St were blocked while the work has been carried by firefighters, he said.
Mr Lyford said - at this stage - there was no report of people in the area at the time of the fire.
A witness at the scene the fire was in a pile of rubber. Another said it was old hockey turf was stored.