The small South Island town of Ashburton was in lockdown as police launched a manhunt for the shooter, named as John Henry Tully, with residents advised to stay inside and not approach him.
"This is an ongoing situation and a full police response has been deployed," police said as armed officers scoured the town.
They said the man entered the Work and Income New Zealand (WINZ) office mid-morning and opened fire with what was believed to be a sawn-off shotgun before fleeing on a bike.
The Public Service Association, the union which covers WINZ employees, said it was arranging counselling and support for staff at the Ashburton office.
"That two people have died and one more is in a serious condition is inexcusable, and we hope the police can bring the shooter to justice," national secretary Richard Wagstaff said.
"Nobody should go to work in fear that they might not return home."
The third shooting victim was reported to be in a serious but stable condition in hospital.
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