Three boats at the Waikawa Bay marina in Picton caught fire and sank early on Thursday morning
Peter Beech, who lives across the bay from the marina, was involved in fighting the fires.
He said his children saw a ball of flames about 6am and called the fire service.
The cabin of a wooden fishing boat that caught fire disappeared within minutes, he said.
Mr Beech said the ropes then burnt through, setting the boat adrift, which became a "classic fire ship".
He said firefighters managed to dampen the drifting boat but the two fibreglass launches were more difficult to extinguish.
Fire crews could not save either the Pijima or the Superstar - each modern boats 12 to 14 metres long.
However the quick work by firefighters was credited with stopping the spread of the fire throughout the very large marina where hundreds of boats are moored.
Two of the boats sank at the marina berths and the third at the marina entrance, where it had been towed.
Efforts were being made on Thursday to lift the charred remains of the boats onto a barge.
The Marlborough Harbour Board has surrounded the berths with absorbent booms in case of any diesel spill as the boats are salvaged.