Rescuers are trying to reach a teenager after he fell 80 metres down an escarpment in the NSW Hunter Valley.

Police say the 17-year-old and a group of mates were trying to gain entry to a bush dance in the Watagan State Forest near Lake Macquarie about 10.30pm on Saturday when he became disoriented.

His friends raised the alarm and contacted emergency services.

The youth was located about 4.15am and as of 7.30am was understood to be alive but suffering suspected fractures and internal injuries.

Police have made contact with the youth but he has not yet been reached by rescuers.

"Due to the rugged terrain and prevailing rescue conditions, rescue teams are going to have to walk in to where the teenager is [rather than winching him out]," police said.

A dance party called 'Solstium Shadows - A Winter Solstice Bush Gathering' is being held in the area this weekend. It is not confirmed that this is the event the youths were trying to reach.

AAP with Michael Koziol