James Skillen wandered away from a campsite in the NSW Hunter region, with search crews spending the night in bushland looking for him.

Before being located on Sunday at 11.40am, he had last been seen about 5pm on Saturday at a campsite with his family who were enjoying an Easter break on a property on Old Ilford Road, Razorback, about 69km south of Mudgee.

An extensive search of the area by police, NSW Ambulance, the Rural Fire Service, SES and the NSW Volunteer Rescue Association was undertaken.

Members of the local community found James walking a 4WD bush track five kilometres south-west of where his family were staying. He was airlifted back to his family, where he was greeted by the cheers of rescue services and local volunteers.

James' father, Peter Skillen, tearfully told reporters his son "says he tried to jump on a kangaroo this morning because he thought the kangaroo might take him home".

While the toddler from Mittagong couldn't convince the roo for a ride, Mr Skillen said James was "very happy he got to ride in a helicopter".

Overnight temperatures dropped to 15 degrees.

Superintendent Peter McKenna of the Orana midwestern police district thanked everyone involved in the search.

"Some people have been here all night taking part in it. Members of the community have even brought the emergency services food, tea, coffee," Superintendent McKenna said.

"That's what you find in regional NSW and country people, you know, they care for one another. And it has been another great outcome because of that."

AAP with Sydney Morning Herald