At least 70 buildings have been destroyed on the Far South Coast, and the Rural Fire Service said that number could increase as firefighters continue to battle the bushfire.
RFS Deputy Commissioner Rob Rogers said early estimates from overnight suggest 70 buildings have been lost in Tathra.
The bushfire, which began early on Sunday afternoon near Tarraganda, south-east of Bega, jumped the Bega River under hot and windy conditions towards Tathra.
The NSW Rural Fire issued an "emergency" warning for the blaze shortly before 4pm.
Greg Allan, spokesman for NSW RFS said all residents in the coastal town of Tathra have been warned "it is too late to leave" and to seek shelter.
The blaze, which has not yet been contained, has burnt approximately 150 hectares and the NSW RFS has received unconfirmed reports of damage to properties and houses lost in the area.
It is just one of 37 grass and bush fires burning in NSW on Sunday, with 27 burning out of control at 5pm, as temperatures soar above 40 degrees across the state.
While firefighters and residents have saved many homes in #Tathra, a number have been destroyed. The exact number won't be known for some time when Building Impact Assessment teams can get into the area. The fire has burnt right to the coast under strong winds. #nswrfs#nswfirespic.twitter.com/CARce7Ok2m— NSW RFS (@NSWRFS) March 18, 2018
Dan Bennett, currently living in Tathra, said his family had been celebrating his parents' birthdays at their home when crews in fire engines "screamed" into their street and told them to evacuate.
"All of a sudden [the conditions] just turned, we could see flames a couple of streets away. It just turned on a dime," Mr Bennett said.
"The smoke was so thick. There were lots of embers flying about."
His family, who are bunking down for a stressful night a relative's house in nearby town Bega, have since heard the fire swept through their street and most of the town.
"When we were getting in the car to leave, our neighbours across the road could see [the fire] behind our house," he said.
"We’re all safe, but our biggest concern is the house... "It's [my parents'] forever home - they have been there for about 13 years.
"It's going to be a miracle if it's still there."
Mr Bennett had heard the local supermarket, public school, bakery, chemist, bowling club, and holiday apartments had been affected in the fires, but the extent of damage to the town remains unknown.
Shane Fitzsimmons, NSW RFS Commisioner, told Channel 7 News that the "large, fast-running fire" had burnt "right into the back and all in and around the community of Tathra".
Mr Fitzsimmons said the number of houses damaged or destroyed could be "in the dozens", and conditions remain "very dangerous and volatile" in the area.
Nineteen firefighters from the Rural Fire Service battled the fire amid "strong and gusty north-westerly winds" and temperatures above 38 degrees, assisted by helicopters and Fire and Rescue NSW. A large air tanker flew to the area from Victoria to "make a drop" on the bushfires, Mr Allan said.
A southerly change is sweeping through the area, pushing the fire in a notherly direction which may pose risks to other properties in the region.
"The risk is that the side of the fire could become the frontline [with the southerly change]," Mr Allan said.
"It's pretty unpredictable, given these conditions, but the crews are working fast and hard to contain it.”
While firefighters and residents have saved many homes in #Tathra, a number have been destroyed. The exact number won't be known for some time when Building Impact Assessment teams can get into the area. The fire has burnt right to the coast under strong winds. #nswrfs #nswfires
Residents north of the Bega River have been advised to head in a northern direction towards Bermagui. Campers at campgrounds to the north have been relocated where it is safe to do so.
An evacuation centre has been established at the Bega Showground.
More than half of the state was under a total fire ban on Sunday, including the Greater Sydney Region, Greater Hunter, Illawarra/Shoalhaven, Far South Coast, Monaro Alpine, Southern Ranges, Central Ranges, North Western, Lower Central West Plains, Southern Slopes and Eastern Riverina regions.
Meanwhile, in Victoria, homes were destroyed as firefighters battling fierce winds worked to contain a cluster of fires burning out of control in the state's south-west.