Firefighters were called to a "large fire at a derelict factory at Lower Horseley Fields" just after 9pm on Monday, with a major incident being declared around an hour later.
The fire was engulfing the entire factory, and photos and videos from the scene captured the sheer scale of the blaze.
With the incident still ongoing, a fire service statement said: "Four fire engines initially responded.
"Our response was quickly increased due to the scale of the fire, and we now have more than 20 of our appliances in attendance.
"Two hydraulic platforms are also being utilised as our crews continue to tackle the blaze," the statement continued.
A major incident was declared after 10pm because of the "size of the incident and its proximity to the nearby railway line and houses."
Firefighters, Wolverhampton Police and the Ambulance Service urged local people to keep their windows and doors closed.
At 11:10pm, the fire service confirmed: "All nearby trains have been stopped, and a full evacuation of the site has taken place.
"Our crews are tackling the blaze from multiple angles, and we have more than 100 firefighters in attendance.
"Our High Volume Pumping Unit (HVP) is pumping water from a nearby canal."
"Colleagues from Network Rail are utilising their thermal imaging drone to provide us with an aerial view of the incident, to help inform operational decisions," the fire service statement continued.
After midnight, there was confirmation that local residents could be evacuated due to the amount of smoke.
"Efforts to tackle the fire continue, as crews work to create a fire break to prevent any further spread," a statement said.
"Due to the amount of smoke, an evacuation area is being developed for local residents.
"With help from Wolverhampton Council, transport is being arranged for residents to evacuate to two nearby leisure centres."
Wolverhampton and West Midlands Ambulance Service also confirmed that they were supporting the fire service in their efforts to get the blaze under control.
"Road closures are in place and we need people to stay away from the area," the police said in a short statement on social media.