Police have warned people to close doors and windows after thick black smoke billowed from a scrapyard.
The incident in Byker, Newcastle, was reported to police at 12.25pm today and officers closed surrounding streets.
A Northumbria Police spokeswoman said: "Local businesses and residents are being advised to stay indoors and keep windows and doors closed as a precaution because of the thick smoke."
Leighton Street and Byker Bank between Northumberland Terrace and Ouseburn Road, east of the city centre, are currently closed.
The plume of black smoke billowing into the sky could be seen clearly from the busy city centre shops.
Twitter user Holly Kennedy wrote: "Fire in Newcastle looks terrifying" and posted an image of the smoke.
Northumbria Police said it was treating the blaze as a critical incident, less serious than a major incident which could involve several casualties.
The owner of a furniture business over the road from the blaze said he could feel its heat through his office wall.
Dan Rose, 28-year-old owner of design firm Raskl, added: "The scrapyard wall is 15ft high and we can see flames coming over the top.
"We can hear the occasional bang and see bottles and cans flying in the air.
"I am inside my office and I can feel the heat through the wall. It's mental. The internet is not working now, we think the fire might have melted the cable."
A workman near the scene, who did not want to be named, believed the scrapyard stored old fridges and aerosols, among other items.
"It started around midday and at first we thought it was a small fire but it grew and grew," he said.
"Fire engines and the police helicopter arrived almost immediately."
Amy Jones, a shop assistant from Walker, said: "The whole of the East End of Newcastle is under a shroud of smoke.
"It looks like the world is coming to an end. It's pretty frightening."
People have reported seeing the smoke around 60 miles away in the Scottish Borders.
Northumbria Police said no one was thought to have been injured.
Roads leading to the scene were jammed and scores of people were on the streets taking pictures.
A fire officer said water will be pumped from the Tyne using a kilometre-long high-volume hose. It will be directed on to the flames from above using two raised platforms.
The Environment Agency is also involved in the operation.
Tyne and Wear Fire Service said 40 officers were dealing with the blaze at a former scrapyard in Albion Row, Byker in Newcastle. Twelve fire appliances are on the scene, including two specialist aerial ladder platforms.
A spokeswoman said: "Our control room has been inundated with calls about the incident and we would like to thank the public for their vigilance."
Mother-of-two Kath Lowe, 35, of Heaton, was helping tend the allotments at Hotspur Primary School on nearby Mowbray Street in Newcastle when the fire began.
She said: "We were outside with all the kids when suddenly the sky began to fill with black smoke.
"We were watching it pouring upwards when the wind changed direction and the plume began to billow towards the playground.
"We had to get all the kids indoors. the amount of smoke was incredible, and pitch black. It was like the hellmouth had opened."
Newcastle College student Amy Wemyss, 18, of East Boldon, walked from her college campus to see the fire.
She said: "We were talking to some guys who had a mate who works there and they said apparently they were picking something up and it just sparked as they went along.
"It just started little and then just spread really quickly.
"There have been loads of bangs which must be the gas canisters going off and the cars look like they are absolutely blazing. It looks not good."
Hazardous area response team manager for North East Ambulance Service Simon Swallow said: "I've seen a few fires in my time and this is a very big one. I've got a feeling it might go on for some duration."
One man has been taken to hospital as a precaution due to the effects of smoke, police said.
Smoke coming from the blaze was not believed to be toxic, a force spokeswoman said.
Three and a half hours after the blaze, a Facebook page called I Survived the Great Fire of Byker had attracted 2,400 members.