Heavy rains in the mountainous Oaxaca state are believed to have triggered the landslide near Santa Maria Tlahuitoltepec, a town of about 9,000 people who largely speak an indigenous language.
Donato Vargas, an official in the town reached by a satellite telephone, said: “We were all sleeping and all I heard was a loud noise and when I left the house I saw that the hill had fallen.”
Mr Vargas said he had called the Mexican army and state officials for help.
“It has been difficult informing authorities because the road are very bad and there isn’t a good signal for our phone,” Mr Vargas said before losing the connection.
Ulises Ruiz, the state’s governor, said 500 to 1000 people were feared buried in the landslide.
“It is raining a lot and we are told that an area about 200 meters (650 feet) wide (collapsed),” he said.
Rescue workers from the army, navy and federal police were flying in from Mexico City and emergency personnel with rescue dogs and digging equipment have been sent to the town, which lies about 50 miles east of Oaxaca city and 130 miles from Mexico City. Under ordinary circumstances, the town is a four-hour drive from the state capital.
Heavy rains have fallen across Central America and southern Mexico for days as two storm systems moved across the Western Caribbean.
Parts of Mexico are enduring their worst rainy season on record, which has triggered heavy flooding and forced thousands of people from their homes in vulnerable parts of the country.
Huge swaths of riverside communities in southern Mexico were still under water Tuesday — flooding exacerbated by the passage of Hurricane Karl and Tropical Storm Matthew. At least 15 deaths in Mexico were blamed on the hurricane.