Children in Sydney's east choked on fumes as tear gas was used to break up a brawl at a prison - as inmates spelled out a political message on the ground.

The brawl at Long Bay Correctional Complex broke out between inmates in an exercise yard about midday. It is understood the dispute began over drugs.

Corrective Services NSW said tear gas was deployed after inmates began fighting while others "refused to obey officers' directions and allow staff to go into that yard and stop the fight." "Inmates in another two yards then began refusing to obey staff directions," a Corrective Services NSW spokeswoman said in a statement.

Local residents say children were crying as they choked on the gas.

"Saw a bunch of people running from the beach and playground, lots of kids crying. All of a sudden there's this pungent smell, eyes and throat burning," a nearby resident wrote on Facebook.

One prisoner was taken to hospital after being bitten by a security dog, when he reportedly refused to drop a prison-made weapon.

Helicopter vision captured by the ABC showed inmates using materials to spell out the letters BLM, believed to be a reference to the Black Lives Matter movement.

Smoke from the tear gas canisters reportedly drifted into neighbouring streets causing watery eyes and sore throats among locals.

According to the ABC, officers handcuffed and escorted the inmates back into the facility one-by-one after the smoke dissipated.

The facility in the suburb of Malabar was placed in lockdown after the fight and when other prisoners in the yard ignored orders from guards trying to restore order.

"The incident started about midday when a number of inmates in one yard began fighting," a Corrective Services spokesperson said.

"Other inmates refused to obey officers' directions and allow staff to go into that yard and stop the fight. Gas was deployed to safely secure those inmates."

Inmates in another two yards then also began refusing to obey directions, the spokesperson said, and more gas was deployed.

There was so much tear gas that it wafted into nearby homes, with residents complaining of burning eyes, throats and noses.

Children at a local playground were also affected.

Live vision of the facility showed prisoners lying on the ground handcuffed and heavily armed guards patrolling the yard.

Locals could hear yelling over the loudspeaker telling inmates to get on the ground and face the fence, followed by the sound of banging as tear gas were deployed.

Several police were deployed to assist but the situation was eventually brought under control.

Originally published as Rioting inmates send message to the world