Managed isolation facility Rydges Hotel was evacuated for one hour on Wednesday afternoon.
Fire and Emergency were called to the Federal St hotel around 3:30pm on Wednesday.
They told Newshub it was a false alarm.
Rydges Hotel has been housing returning New Zealanders during their 14-day stay in quarantine to ensure there is no community transmission of COVID-19.
Photos from the evacuation show hotel guests standing outside in the rain
A woman who is staying at the hotel told Newshub the evacuation was initally poorly organised.
"It was a bit of a shit show [keeping everyone under control at the start]... social distancing went out the window."
She says the rain added to the chaos and it would've been easy to "do a runner" because there weren't enough staff monitoring outside.
Due to the hotel's central location, she says some members of the public accidentally walked through the crowd until staff told them to stay away.
But after about five minutes, she says staff had the situation under control and umbrellas were being given out.
"It wasn't very well executed but they did the best they could."
The woman says "a better plan" needs to be made in case a quarantine or managed isolation facility is evacuated again.
A COVID-19 All of Government Response Group spokesperson says everyone was safely evacuated and there was a "requirement to maintain physical distancing".
"Returnees were evacuated to the designated assembly point under the guidance of the onsite coordinator," they say.
"Due to a large number of people evacuating from three exits, there was a short time where social distancing could not be strictly followed. In these instances, the risk was mitigated through the use of PPE and masks, which returnees must wear outside their rooms. Any contact closer than two metres would have been for less than 15 minutes."
Once outside, they say all staff were focused on reminding guests about social distancing and the facility staff saw no evidence of bubble breaking or mingling with the public.
"The area where guests were standing was cordoned off, with police stopping vehicle traffic, and pedestrians being stopped by AVSEC, NZDF and other staff members. During the evacuation, shared bubbles from within the facility would have been standing together," they say.
"The building was cleared for re-entry around 3:50pm, with re-entry completed around 4:30pm with returnees safely returned to their rooms."