The road was closed by the NZTA at 4pm on Friday because of wild weather and the landslip was discovered at 6am on Saturday by a contractor at a point known as "Red Slip", estimated to be 2km on the Milford side of Falls Creek.
NZTA Southland area manager Peter Robinson said tourism operators were notified ahead of the closure and "most people were evacuated from Milford". The road is the only land-based entry and exit to the popular tourist area.
Mr Robinson said the road beneath the rocks - some as large as small cars and weighing up to 200 tonnes - had been punctured, and it was likely a gravel fill would be placed into the gap to enable one lane to open.
"That will be a temporary fix."
Real Journeys chief executive Richard Lauder said he could have been the last vehicle into Milford on Friday and said as well as the slip, a number of avalanches had occurred in the area during the storm.
While the road is closed, Mr Lauder said his company was able to offer customers trips to Doubtful Sound and the Te Anau glow-worm caves, although he said for some businesses it could be "shut down and money-back time".
Despite the wintry weather, which brought snow to low levels, the company had switched to its summer programme and had more boats operating in Doubtful Sound.
He praised the NZTA for pre-emptively closing the road.
Yesterday, Mr Robinson said geotechnical experts had completed their assessment of the site and were looking at creating a "bund" above the slip to contain any loose material.
He could not say whether the bund would be a permanent safety feature in the area.
The duration of the full-road and subsequent one-lane closure was uncertain, and would depend on how quickly contractors could move the rocks.
Mr Robinson said a further update would be available this morning.
