West Midlands Fire and Rescue Service said they had up to six crews dealing with the fire at the EMR Scrapyard on Bilston Road near to Crown Paints.
Smoke and towering flames have been visible in the Wolverhampton area this evening after the fire broke out at around 8pm.
A number of cars on the yard were involved.
Group Commander Neil Griffiths gives an update on the fire
Neil Griffiths, operating commander from Sandwell and Dudley, told the Express & Star on the scene: "We received the call at around 7.55pm. When we arrived we found a number of cars caught fire.
"Fortunately nobody has been injured. We have 25 firefighters here. We're concentrating on making the area safe.
"I expect that we will be here for a significant part of the night.
"We have been liaising closely with the owners.
"No investigations have been undertaken yet, we are concentrating on getting the fire under control, there is still a lot of smoke."
The cause of the fire is not yet known and fire crews are expecting to work through the night.
Jiao Han, who works at the nearby Tiger chinese takeaway, was shocked to see the massive clouds of smoke and firefighters rush to the scene.
She said: "There was a crowd of about 30 people here before. We were concentrating on work in the back. We didn't hear anything.
"But then we came out to the front and it was like 'wow'.
"There was so much smoke, and the fire people came. It's good that no-one is hurt. You don't expect to see something like this just outside.
"I think because it was late and people are going home nobody was there. I have no idea why it happened."
There are no reports of any injuries at this time.