Interislander's Aratere ferry has successfully been refloated on Saturday night, shortly after 9pm.
It became stuck in sand and mud near a rocky cliff face in Tītoki Bay near Picton after a "steering failure" around 9:45pm on Friday.
Story continues after live blog
KiwiRail chief executive Peter Reidy said the ship was travelling at a speed of 3 knots when it ran aground.
"It's nestled into the sand, it's not jagged rocks. It's sand and mud," he told reporters.
With the amount of maintenance KiwiRail has done on the Aratere, Reidy said they're "very disappointed" with what's happened.
"We have invested significant money and time, recently, in upgrading the steering system," he added.
Interislander executive general manager Duncan Roy said all passengers who were on the Aratere have now been disembarked, and some crew members have been swapped over.
"The operation was conducted smoothly and safely," Roy said.
Roy confirmed the Aratere completed a maintenance programme just three weeks ago.
"We brought in experts from overseas and that was part of our effort and commitment to improving the maintenance and reliability of our ferries," he told reporters.
Transport Minister Simeon Brown met with Reidy and Roy in Picton on Saturday afternoon.
Brown said the Aratere grounding was a "very concerning incident".
"I think it's really important to, right at the start, acknowledge that it's great there's been no loss of life," he said.
Investigations are now underway by the Transport Accident Investigation Commission (TAIC) and Maritime NZ, Brown added.
"These investigations will determine what went wrong, and what can be done to prevent this happening again.
"Ministers have made their expectations clear that KiwiRail must take all steps necessary to maintain the safety and reliability of its existing ferries, and ministers have been disappointed with the state of the asset management that we have seen from KiwiRail."
Marlborough District Council's Harbourmaster has enforced a 500m exclusion zone in the harbour around the Aratere, and will be patrolling.
Port Marlborough said in a statement they have mobilised their marine and pilotage teams, and two of its tugs on the water are on standby to help when needed.
Nadine Taylor, Mayor of Marlborough/Te Tauihu, told Newshub hearing the news was "quite a shock".
"I got the phone call from our chief executive around 10pm pretty soon after the Aratere had grounded," Taylor said.
Divers have been in the water to assess the ship's hull, she added.
"It's very much been a team effort."
Labour MP Rachael Boyack told Newshub she drove over to Waitohi/Picton last night from Whakatū/Nelson after hearing about the grounding.
"Our biggest concern of course is for the passengers and crew on board the ship," Boyack said.
"It's really devastating to see. The Interislander ships are iconic in New Zealand and for us in the top of the south, we have a lot of love for the brand," she added.
"We rely on them."
National MP Stuart Smith told Newshub the Aratere grounding is "absolutely shocking".
"There's some serious questions that have to be asked. The Minister [of Transport] has KiwiRail staff in his office as we speak, getting a briefing," Smith said.
"When they decided to go with the new ferry option, did they maintain those ferries as though they were going to keep them?"
He said it was "fortunate" the Aratere grounded at Tītoki Bay and not elsewhere.
Maritime Union national secretary Carl Findlay says it's concerned the ferry crews have been "placed in danger", despite being "experienced professionals and will be doing their jobs even in these extraordinary conditions".
"The Interislander ferries are at [the] end of life and there have been repeated incidents, such as the loss of power on the Kaitaki last year.
"If this incident does not shake the Government out of its complacency about the need for investment in new vessels and infrastructure, what will it take?"
News of the Aratere running aground broke late on Friday night.
Picton resident Stewart Ireland watched it unfold from the viewing platform in the town on Friday night.
"Never seen anything like it in my lifetime," he told Newshub.
In an initial statement, Interislander general manager Duncan Roy said it happened at 9:45pm "following a steering failure".
"It was a freight-only sailing with eight commercial vehicle drivers and 39 crew on board. There are no injuries and the vessel is watertight.
"The Picton Harbour Master is on board and we are working with him to move the vessel back to Picton."
In an update just before 11am on Saturday, Roy said the eight passengers and 12 of the crew were safely disembarking.
Maritime NZ said early on Saturday the vessel would be refloated "as tidal conditions allow".
It said there is "no water ingress [entering the vessel] and no oil going into the marine environment".
"Besides working with KiwiRail and others as part of the response, Maritime NZ will be investigating the cause of the grounding."
But an attempt to float the vessel at 9am on Saturday was abandoned as officials wanted divers to assess the boat before attempting to move it.
