The villagers were evacuated at dawn from the western village of Kolontar, closest to the reservoir that burst on Monday, killing seven people and injuring scores, and poisoning the surrounding countryside.
Authorities meanwhile warned thousands of residents in the nearby village of Devecser to be ready to be moved if necessary, officials said.
“The reservoir is so damaged that it is likely that it will give way for a second time,” prime minister Viktor Orban said.
“If the dyke of the reservoir gives way, about 500,000 cubic metres will be released. Several cracks are visible from the north side of the reservoir,” he said.
The first flood on October 4 released 1.1 million cubic metres of foul-smelling red toxic sludge into villages and rivers, killing seven people and injuring scores.
The new crack was seven centimetres wide, officials said.
The Kolontar villagers were transported by bus to Ajka, the nearest major city which is 160 kilometres from the capital Budapest.
Some were to stay with friends and relatives and those with nowhere else to go would be put up in the town’s sports complex, officials said.
“There is despair and sadness, but no panic,” said Mr Orban, who was at the scene with Defence Minister Csaba Hende, national police chief Jozsef Hatala and the national chief of disaster relief services Gyorgy Bakondi.
Police and army personnel were also deployed in the neighbouring village of Devecser to urge people to pack all they need in one suitcase so they could leave quickly if necessary.
Authorities started to build a dam in Kolontar to save those houses that were undamaged, the Hungarian News Agency MTI reported. The new dam would be four to five metres high and made of earth and rocks.
The death toll rose to seven after another body was found. One person is still missing.
Around 150 people have been wounded, many suffering burns.