Emergency crews have contained a grass fire at Goulburn in New South Wales that closed the Hume Highway in both directions, and are stamping out remaining flare-ups.

Traffic diversions were put in place between the Federal Highway and Goulburn, 80 kilometres north of Canberra since the fire jumped the highway shortly after 1:00pm on Friday.

The Rural Fire Service (RFS) issued a watch and act notice but have downgraded the fire's status to advice, and are confident the fire has been contained.

The highway has now re-opened, and diversions have been lifted.

Up to 20 RFS tankers and aircraft were called in to fight the grass fire. ( ABC News: James Fettes )

Up to 20 RFS tankers and aircraft worked to put out the fire, which started at the south end of Goulburn, and moved south-east.

RFS Southern Tablelands operations officer Ian Kennelly said the fire burned on nearby paddocks.

He said some sheds had been damaged during the fires, but that was the extent of the damage.

RFS Commissioner Shane Fitzsimmons said the fire likely started after a minor car accident.

"Early indications are that a vehicle had a failure of a wheel, that wheel has started a fire on the median strip right near the interchange of the Goulburn Big Merino," he said.

"That fire then burnt on the median strip, it crossed to both sides of the freeway, burning back up in toward homes on the northern side of the freeway and right down into paddocks and other property on the southern side."

RFS firefighter Jake Roarty said conditions meant the fire took hold with ease.

"Everyone can feel that the temperatures are really high, the winds are pretty high, so it's starting to dry some of that fuel out," he said.

"It's pretty good fire weather.

"There is a lot more fuel on the ground."