The town of Whaley Bridge in the High Peak area has been evacuated after extreme weather badly damaged a dam wall at Toddbrook Reservoir.
Pictures posted on social media showed panels on one side of the dam.
The Environment Agency issued a severe flood warning indicating danger to life at the town.
It said river levels in the River Goyt could “rise rapidly” as a result of water coming from the reservoir.
Derbyshire Police said it was unclear how long the evacuation would last.
The force tweeted: “Officers and staff will be at the school to give further direction but at this time we aren’t sure how long the evacuation will take.
“Please make alternate arrangements to stay with friends/family, ensure that pets and medication that may be needed for a number of days are taken.
“If people do not have somewhere to go then they will be accommodated, however there is limited capacity to do so.”
It later tweeted: “Warnings to stay away from the #WhaleyBridge area are continuing. Residents who have been at work, or away from the area, are strongly advised to stay away following advice from the @EnvAgency who have indicated that the incident currently poses a significant threat to life.
“Anyone outside the cordon is asked to go to #Chapel High School, Long Lane, #ChapelEnLeFrith, High Peak, SK23 0TQ, where further direction will be given. Please make arrangements to stay with friends/family, if you can’t you will be accommodated but there is limited capacity.
“We understand that there will be some concern around not being able to return home, however our priority is to ensure people are kept safe and well and are not taking unnecessary risks.
“This is not a decision that has been taken lightly and we appreciate that there is significant impact on this community, however this is an unprecedented, fast-moving, emergency situation.”
As a helicopter hovered above the village, police officers were going door to door in Whaley Bridge to get everyone out.
Going the other way were teams of council workers and mountain rescue vehicles heading into the village.
Dragging a suitcase of possessions up the deserted high street, local David Holt said: “Police are knocking on, evacuating everyone within risk of that dam wall breaking.
“If it’s going to go, it’s going to go straight through the village.
“Police are asking you to gather some belongings, leave your house in a secure condition and go to a local school.
“We’ve taken an elderly neighbour to a friend’s house and are heading to the school now.”
Anna Aspinall, 36, said she and others had been called to help place sandbags in the area around the dam, but were sent away after structural engineers advised “that the wall is at high risk of failing”.
“We have had significant rainfall over the past few days resulting in the overflow of the reservoir, which is very rarely breached, being completely flooded over,” she said.
“The result is that the overflow this morning has undermining damage and there is a big risk of the village being flooded out. Residents are currently being evacuated along with businesses.”
“We are praying (the dam wall) holds whilst the Canal and River Trust try to drain the water from the reservoir. I live at the top of a hill but am very involved in community life, so want to help where I can,” she added.
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