Officials said the scenic Adelaide Hills, northeast of Adelaide city, faced "an incredibly dangerous fire" which, with high winds and temperatures forecast, was impossible to fight head-on.
Dotted with pretty villages, the area is known for its farming produce and wineries and has a population of some 40,000.
"At the moment, we have a fire which is extremely dangerous and it is burning under extremely adverse conditions," South Australia's Country Fire Service chief Greg Nettleton said.
The blaze at Sampson Flat is burning freely in all directions and in an erratic manner, after spreading rapidly from a 154 hectare fire on Friday afternoon to one covering 4,741 hectares with a perimeter of 38 kilometres.
The fire is in rugged country and subject to unpredictable behaviour due to wind gusts, forcing firefighters to abandon hopes of stopping the blaze until the weather abates.
So far five homes have been destroyed but authorities said this number could rise as winds reach speeds of up to 110 kilometres per hour.
"Right at this moment, residents in the Adelaide Hills are being confronted by a fire which hasn't been seen in the hills since the 1983 bushfires of Ash Wednesday," Nettleton said.
The 1983 disaster killed more than 70 people in South Australia and Victoria and destroyed thousands of homes and buildings.
South Australian Premier Jay Weatherill urged residents in the areas at risk to leave immediately or prepare to stay and defend their homes.
"If you've decided to stay, you need to be aware that the fire will become incredibly scary and could lead you to change your mind at some point. It could be a catastrophic decision for you to leave late," he said.
New South Wales and Victoria were prepared to help South Australia combat the blaze which has been declared a major emergency, he said.
In Victoria, where temperatures are forecast to top 40 degrees Celsius, one fire is still burning out of control near Maroona in the state's west after firefighters battled more than 320 blazes overnight.
Bushfires are common in Australia in the summer months. In February 2009 the devastating "Black Saturday" bushfires in Victoria left 173 people dead and razed more than 2,000 homes in the nation's worst natural disaster of modern times.