Historic New Orleans, which has long feared extinction if a massive hurricane made a direct hit, endured extensive damage on Monday from Katrina's 216kph winds after the storm came ashore from the Gulf of Mexico.
By noon (1700 GMT) Katrina's winds had decreased to 170kph, a Category 2 storm, and its centre was moving ashore at the Louisiana-Mississippi border.
The bowl-shaped city's levee system appeared to be holding off the Mississippi River and Lake Pontchartrain on its edges.
Officials said a breach occurred in nearby St Bernard Parish, where Katrina's eye passed and extensive damage was expected.
About 150 people were reported stranded on rooftops in that southeastern Louisiana parish, where officials said 2.5 to three metres of water swamped the region.
"We're getting reports that (more than 20) buildings are collapsing throughout the city," New Orleans Mayor Ray Nagin said, adding it remained unsafe at midday. "This city is under siege by Katrina."
A New Orleans police car is
abandoned in flood waters
However, Katrina's slight eastern turn that might have saved New Orleans brought its powerful winds and tides into Mississippi coastal tourist havens of Biloxi and Gulfport.
The National Hurricane Centre said the exposed Mississippi coastline could expect 4.5-6 metre storm surges. Mobile Bay in Alabama was swelling on Katrina's approach.
Superdome roof damaged
Winds sent debris flying through the New Orleans' streets, blew windows out of high-rise hotels and tore through the roof of the Superdome, where US Senator Mary Landrieu said 10,000 people had taken refuge.
Governor Kathleen Blanco said in a news conference that the damage had caused leaks and evacuees had been moved to dry areas in the stadium, but there was no immediate danger.
Weather experts had predicted thousands of homes could be damaged or destroyed and a million people left homeless if the storm surge is too great for the levees to hold back.
One million fled
Officials estimated a million people had left the area ahead of the storm, which was once a fearsome Category 5 with winds of 282kph, but many chose to ride it out. It hit land as a Category 4 on the five-step Saffir-Simpson scale.
President George Bush on Monday approved "major disaster declarations" for Louisiana and Mississippi, White House spokesman Scott McClellan said.
Thousand of residents sought
shelter in the Superdome
"This will allow federal funds to start being used to deploy resources to help in those two states," McClellan told reporters travelling with Bush to Arizona.
Artist Matt Rinard, who owns a business in the French Quarter, holed up on the fifth floor of a Canal Street hotel and watched the storm roll in.
He said pieces of sheet metal and plywood, billboards and pieces of palm trees flew down Canal, which borders the Quarter, as gusts of wind blew through the city.
"It's blustery. You can see the speed of it now, it's unbelievable," he said. "The power went out about an hour and a half ago, and so now I'm just watching the occasional dumbass walking down Canal Street."
Utility company Entergy Corp. spokesman Morgan Stewart said that 317,000 customers had lost power in the storm and that the number was expected to grow.
In Mobile, Alabama, 232km east of New Orleans, the storm slammed into transformers, knocking out power for about 200,000 people. Katrina's waves backed up a major canal in Gulfport, 114km east of New Orleans, threatening highways with floodwaters.
Officials said three people from a New Orleans nursing home had died during their evacuation to a Baton Rouge church.
New Orleans had not been hit directly by a hurricane since 1965 when Hurricane Betsy blew in, flooding the city.
Katrina was making its second US landfall after striking southern Florida last week, where it caused widespread flooding and seven deaths.
Katrina grew to a Category 5
Hurricane in the Gulf of Mexico
As the storm plowed through the Gulf, oil companies shut down production from many of the offshore platforms that provide a quarter of US oil and gas output.
At least 42% of daily Gulf oil production, 20% of daily Gulf natural gas output and 8.5% of national refining capacity was shut on Sunday, producers and refiners said.
US oil futures jumped nearly $5 a barrel in opening trade to touch a peak of $70.80. The rise in oil prices fed through to other financial markets, hurting stocks and the dollar on fears that economic growth might be curtailed but boosting safe havens such as government bonds and gold.