Dramatic video footage and pictures posted on Twitter showed thick black smoke bellowing above Kandivali slum, with reports that a series of gas cylinder explosions caused the blaze.
“It’s a major fire,” Dhananjay Kulkarni, a deputy commissioner with the Mumbai police, told AFP.
“Policemen and fire brigade officers are on the spot. They are busy with rescue operations but are facing problems in the relief work because the area is congested,” he added.
Kulkarni said “we fear residents may be trapped” without giving any details on numbers.
Two people with burn injuries had been taken from the slum, an area in the north of the teeming western city, to hospital for treatment, he added.
An official at Mumbai’s fire brigade control room, who declined to give his name, said the brigade had received a call alerting them to the blaze around 12:30.
“Sixteen engines were sent and personnel are still fighting the fire,” he told AFP.
Fire and police officials said an investigation into the cause was under way, but television stations cited local residents as saying the blaze occurred after gas cylinders exploded.
In June, a fire in a high-rise apartment block in Mumbai killed seven people after they became trapped in a lift on the upper floors.
A month earlier four senior officers from a Mumbai fire brigade died in a blaze at another building.