UPDATE: THREE people have been rescued after they abandoned ship when their boat caught fire off the northern NSW coast.

The 12m motor cruiser was in water 17km off Point Danger when a fire broke out about 11.30am (AEST), police say.

The three people on board abandoned the vessel and clung to a jet ski for about an hour. They were picked up by a Point Danger VMR boat and are expected to be returned to land at Tweed Heads this afternoon.

A witness earlier said the boat, about 10nm offshore, was “well alight”.

“It looks like a big cruise ship about 40-foot long,” the witness said.

“I was watching it steam up the coast, but it (the fire) must have only just happened."

The witness had said rescuers needed to get there quick because it was about to go down.

Gold Coast Water Police, Point Danger Volunteer Marine Rescue and Careflight were sent to the stricken vessel.

NSW Police said that witnesses reported columns of smoke could be seen on the horizon at 11.15am.

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