Corrective Services NSW Commissioner Peter Severin said the incident ended just before 3pm and praised the staff involved in managing the situation.

"Correctional officers at Mid North Coast did an exceptional job in remaining calm during this tense stand-off, while also retaining control of the situation," Mr Severin said.

"Prison officers trained in hostage negotiation were able to successfully convince the inmate to release the officer, and we are all very relieved by this outcome.

"It is another example of the dangerous situations frontline correctional officers face while doing their duty to keep the community safe.

"We will be providing all available support to the officers involved."

The incident began at about 10.20am when a 32-year-old maximum-security inmate punched the officer before threatening them with a prison-made weapon.

The incident occurred when the inmate became angry about not receiving his mail after it was intercepted and found to be concealing illicit drugs.

After the hostage negotiator reached a successful outcome, officers secured the inmate and placed him in a segregation cell.

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