Brazilian mining company Vale SA said the flow from the water reached the community of Vila Ferteco and an administrative office.
Employees were present at the latter, which they said "indicated the possibility of victims."
The company said it did not have further information on deaths or injuries at the dam, which located in the town of Brumadinho.
Residents are seen in an area next to the collapse dam
REUTERS
Parts of the city were evacuated while local firefighters were rescuing people.
Helicopter and ground vehicles were used in the efforts.
There were no official reports of deaths though the state fire department press department said about 200 people were estimated to be missing.
Two-thirds of the roughly 300 workers at the iron ore mine were said to be missing.
Vale CEO Fabio Schvartsman said the dam at the Feijao mine in the state of Minas Gerais had a capacity of two million cubic meters and was being decommissioned.
He said equipment had shown the dam was stable on January 10 and it was too soon to say why it collapsed.
A rescue helicopter flies over the incident
AFP/Getty Images
Local television channel TV Record showed a firefighters' helicopter hovering inches off the ground, while it pulled people covered in mud out of the sludge.
Photos showed the rooftops of structures poking above an extensive field of the mud, which also cut off roads.
President Jair Bolsonaro sent a tweet saying he lamented the incident.
He added was sending the three cabinet ministers to the area.
