Officials are still trying to account for everyone who lived in the 18-unit complex, said fire Chief Jim Pendergast.
“Until we get everybody accounted for, until we’ve searched, then there’s still the possibility that there could be somebody inside there,” he said.
About 50 firefighters from nearby Red Deer and Innisfail helped the town’s volunteer department fight the flames, which destroyed the three-storey building.
Fire crews are still pouring water onto the smouldering rubble from several angles to extinguish hot spots.
Nearby resident Cheryl Eastman said she watched as the fire grew quickly.
"We heard a little bit of, I guess, an explosion and went outside. From the bottom southeast balcony, a barbecue, I believe it was a propane tank had exploded,” she said.
“Started with a bunch of black smoke and within maybe 10 minutes, three floors of the building were gone and within an hour the whole building was gone."
Highway 2A was closed while crews battled the fire and the town was asking residents to conserve water.
The Memorial Hall on Flemming Avenue has been opened for residents forced out by the flames and the Red Cross is offering its support. Donations are also being accepted for residents who lost their homes.
“I'm so proud of our town. People came with everything from pillows and mattresses to blankets — the hall is full of stuff,” said Mayor Dennis Cooper.
“I'm just so happy and proud of our community for how they responded for people in need."
It’s not known what caused the fire. Investigators are expected to arrive at the scene on Friday afternoon.
Penhold is about 130 kilometres north of Calgary.
Local resident Justin Bolack sent CBC Calgary a video of fire crews battling the flames. Watch it below. On mobile? Click here.