The incident occurred not long after take-off and the gaping hole caused the cabin to depressurise.
Flight data showed the plane climbed to 4876 metres before returning to Portland International Airport.
NTSB is investigating an event involving Alaska Airlines Flight 1282. We will post any updates regarding the investigation when they are available.— NTSB Newsroom (@NTSB_Newsroom) January 6, 2024
The airline said the plane landed safely with 174 passengers and six crew members.
"Following tonight's event on Flight 1282, we have decided to take the precautionary step of temporarily grounding our fleet of 65 Boeing 737-9 aircraft," Alaska Airlines CEO Ben Minicucci said in a statement.
Each of the aircraft will be returned to service after full maintenance and safety inspections, which Minicucci said the airline anticipated completing within days.
The airline provided no immediate information about whether anyone was injured or the possible cause.
The plane was diverted about six minutes after taking off at 5.07pm on Friday local time, according to flight tracking data from the FlightAware website.
It landed at 5.26pm
The pilot told Portland air traffic controllers the plane had an emergency, was depressurised and needed to return to the airport, according to a recording made by the website LiveATC.net.
A passenger sent KATU-TV in Portland a photo showing the hole in the side of the plane next to passenger seats.
Video shared with the station showed people wearing oxygen masks and passengers clapping as the plane landed.
The National Transportation Safety Board said in a post on X, formerly known as Twitter, that it was investigating an event on the flight and would post updates when they were available.
The Federal Aviation Administration also said it would investigate.
The Boeing 737-9 MAX involved in the incident rolled off the assembly line and received its certification just two months ago, according to online FAA records.
The plane had been on 145 flights since entering commercial service on November 11, said FlightRadar24, another tracking service.
The flight from Portland was the aircraft's third of the day.
Boeing said it was aware of the incident, working to gather more information and ready to support the investigation.
The Max is the newest version of Boeing's venerable 737, a twin-engine, single-aisle plane frequently used on US domestic flights.
The plane went into service in May 2017.
Two Max 8 jets crashed in 2018 and 2019, killing 346 people and leading to an almost two-year worldwide grounding of all Max 8 and Max 9 planes.
The planes returned to service only after Boeing made changes to an automated flight control system implicated in the crashes.
Last year, the FAA told pilots to limit the use of an anti-ice system on the Max in dry conditions because of concern that inlets around the engines could overheat and break away, possibly striking the plane.
Max deliveries have been interrupted at times to fix manufacturing flaws.
The company told airlines in December to inspect the planes for a possible loose bolt in the rudder-control system.
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