A clean-up is underway after a storm ripped through the New South Wales town of Armidale overnight.
The tornado was spotted during a fierce storm that left people trapped in their homes as it hit at about 10pm.
Weatherzone said the funnel cloud formed almost without warning.
"If it hadn't been for the flashes of lightning, residents may never have known what was coming," a Weatherzone spokesperson said.
"But some locals in the northern NSW city of Armidale - population 24,000 - got a huge surprise when flashes of lightning around 10pm on Thursday night revealed the telltale funnel cloud of a tornado."
The Bureau of Meteorology (BoM) is currently investigating the strength of the suspected tornado.
As the storm system swept through NSW yesterday, the BoM issued multiple warnings for damaging winds, heavy rain and large hail for a large area of the state, including Armidale.
The NSW SES received 127 calls for help following the weather event which left half of the city without power.
More than 30 NSW RFS members are assisting the SES crews today.
The tornado ripped off five roofs, brought powerlines down and flipped a car, but no major injuries have been reported.
NSW Fire and Rescue Supt Scott Dodson told Today that clean-up operations are continuing today.
"A lot of damage up in the Armidale area overnight," he said.
"Fire and Rescue is working with SES up there.
"We have just formed some strike teams to go out there and assist the community in there and assist the community in the clean-up."
Are tornadoes becoming more frequent?
The Armidale tornado comes weeks after another tornado ripped through Central West NSW.
Weatherzone said the reason they are recurring with regularity is because we are seeing multi-day storm systems.
"Australia doesn't have as many thunderstorms as places like the plains of the USA, but when we have thunderstorm outbreaks like we do in spring, we are more likely to see a tornado event than at other times of the year," Weatherzone Director of Meteorology Duncan Tippins explained.
"For a tornado to form, you need a supercell thunderstorm of the type which developed over Armidale last night."
NSW battered by heavy rain, hail
It comes as storm-battered New South Wales communities are facing a major clean-up after yesterday's wild weather, with a warning of more severe conditions today.
Large parts of the state were lashed by hail and torrential rain yesterday, with the SES responding to 456 calls for help overnight.
The worst-hit suburbs in Sydney were Penrith and Mount Druitt but the extreme conditions also stretched north to Newcastle and the Central Coast.