The fire started at a chemical plant site, where a variety of volatile chemicals were housed, late on Thursday in Raleigh.
Bruce Radford, the town manager, said he did not know what had caused the fire.
Radford said that there were 20 to 30 explosions inside the plant, and that a chlorine cloud rose 15 meters into the air while flames shot three times as high.
Keith Weatherly, the mayor, said that the fire had spread and appeared to have burned four petroleum tanks belonging to another company.
Hospital officials said on Friday that 18 people had been sent to emergency units for treatment.
Hours after asking almost half of the town's residents to evacuate, officials ordered additional evacuations for several hundred more homes when a plume of smoke and chemicals moved towards the town centre.
Residents 3 kilometers away could see the plume and smell the chemicals, officials said.
Police lined up along the main street that runs through the town's business district, blocking both ends of the road and forcing schools to close down on Friday.
Radford said: "People are going to want to come in and sight-see at this fire scene.
"They will either get terribly sick or they will be arrested. No questions asked."
Admitted to hospital
Of the 18 people admitted to hospital, eight were law enforcement officers and one a firefighter who complained of nausea and respiratory problems.
Heather Monackey, WakeMed representative, said that nine other residents were being treated for "respiratory distress".
Robert Doyle, an Environmental Quality spokesman at the company's headquarters outside Detroit, said an emergency response team was being mobilised to help with the cleanup.
Doyle said the facility handles a wide array of industrial waste - ranging from paints to solvents.
He said: "Because of the many different types of waste that we bring in, it's very difficult to determine the cause of the fire."