At the height of the drama, residents fled "for their lives" as thick smoke blanketed much of the town.
The Country Fire Service (CFS) says it is starting to contain another bushfire burning near Kingston in the state's lower south-east.
The Port Lincoln fire is near Kurara, New West and Robertson Roads and Hilltop Drive and is travelling east.
People in this area are being advised to shelter indoors immediately and stay off the roads.
People should not attempt to leave or enter this area as the roads will not be safe.
Port Lincoln Mayor Peter Davis says there have been no reports of deaths but he is concerned.
"I shouldn't be surprised if there's been loss of life, particularly when it ignited ... that was an explosive situation around three or four hours ago," he said.
Mr Davis says there has been significant property loss but conditions have eased.
"Clearly there are still hotspots but because the wind speed is below 10 knots it's moderated enormously," he said.
Homes without power
More than 6,000 homes in the area are still without power.
Port Lincoln resident Michael Sleep, who sent photos of the blaze to ABC Online, says an earlier change had worsened the fire.
"Things got pretty scary. Wind changed direction and there was smoke everywhere with ash blowing in. Had to get on the roof and block and fill the gutters," he said.
CFS spokeswoman Hayley Cahalan says water bombing aircraft are being used in Port Lincoln.
"The fire has destroyed multiple homes possibly in the number of five to six at this stage, but that is unconfirmed," she said.
Ms Cahalan says 150 firefighters and 30 fire trucks are trying to contain the blaze, but she says some water bombing aircraft cannot be used because of local conditions.
"The temperature and the turbulence being generated by the fire has meant that some of the aircraft are not able to operate. It's not safe for them to be up in the air due to the serious nature of this fire," she said.
Ms Cahalan says fire crews will be back-burning through the night at Kingston to bring the fire there under control.
She says smoke will make travelling in the area dangerous.
Belinda Gibson from the weather bureau says the temperature has now eased to about 33 degrees in Port Lincoln.
She says conditions should continue to ease overnight.
"Now that the change has come through Port Lincoln has cooled down. Down at Kingston I imagine it's probably cooled down a little bit," she said.
"The winds should start to be easing back through the evening, increasing humidity and lowering the temperature."
More than half of South Australia's 15 fire ban districts have been subject to catastrophic fire danger ratings today, due to hot and windy weather.
) feeling like migrating to some other place, with sane weather patterns!
I don't actually have 25 light sockets to put them in! Anyway, our taxes at work. 