The CN Rail derailment happened Tuesday morning about 17 kilometres west of the town, which is about 230 kilometres east of Saskatoon.
Officials are worried about toxic smoke from the burning railcars and are keeping people eight kilometres from the scene.
Heavy smoke and fire were seen coming out of the crashed cars.
Allison Squires of the Wadena News told CBC it appeared there were a dozen or more railcars off the tracks.
"It's a nasty derailment," said Squires, who is the publisher and editor at the weekly newspaper.
It's not clear which cars are burning. One of the cars near the fire was for anhydrous ammonia, a highly toxic material used to make fertilizer, she said.
It appears there were also some grain cars and oil cars involved, Squires said.
A CN hazardous materials team is believed to be en route, she said.