NSW Premier Gladys Berejiklian has confirmed three people were killed when a water-bombing aircraft crashed in the state's south.

All three of the victims were American residents.

The NSW Rural Fire Service is addressing reports one of its air tankers may have crashed in southern New South Wales. https://t.co/Jry5BVb7mM — SBS News (@SBSNews) January 23, 2020

"Our thoughts and prayers and heartfelt condolences go to their families." Ms Berejiklian said in a press conference.

The Hercules C-130 plane had been used under contract in the state for a number of years from partners Coulson Aviation.

Deeply saddened to learn of the death of 3 people in the crash of a C130 fire fighting aircraft, north east of Cooma in NSW earlier today. My deepest condolences to the loved ones, friends and colleagues of those who have lost their lives. Such a terrible tragedy. — Scott Morrison (@ScottMorrisonMP) January 23, 2020

NSW RFS Commissioner Shane Fitzsimmons has indicated there is currently no firm evidence to indicate what caused the accident.

"Reports are that there was a large fireball associated with the impact of the plane as it hit the ground," Commissioner Fitzsimmons said.

“The firefighting fraternity, as we keep saying, is a tight-knit family, a fairly small family, and the crew on board were well known, not just to their colleagues here in Australia."

"First and foremost, our thoughts and prayers are with the three occupants who routinely crew that specialised aircraft."

AAP

As a precaution, Coulsons grounded their large air tankers on Thursday afternoon.

The region remains an active fire ground, with a number of firefighters in the area working to contain the blaze.

Crews lost contact with a Large Air Tanker when it was working in the Snowy Monaro region.

The names of the victims are yet to be released, with authorities working to notify their families.