Fire officials said that about 40 homes in the 1,700 square meter area have been destroyed in the incident, as per Reuters reports. About 290 firefighters, 10 helicopters and police officers dispatched to contain the blaze.
However, no casualties have been reported so far.
Photos from the scene showed firefighters fighting the flame under thick white smoke covering the village known for its dense rows of makeshift houses as helicopters sprayed water from above.
Kim Ah-reum, an official at the Gangnam district office, said around 500 residents have evacuated to nearby facilities including a school gym. Officials were planning to later move the residents to nearby hotels, as per AP reports.
President Yoon Suk Yeol, who is in Switzerland at the World Economic Forum, called for all-out efforts to minimize the damage and mobilize all available firefighters and equipment, his spokeswoman Kim Eun-hye told Reuters.
Interior Minister Lee Sang-min also instructed the officials to prevent secondary damage and protect residents in nearby areas, the ministry said.
The area has also been prone to fires, floods and other disasters, with many homes built using cardboard and wood, and residents exposed to safety and health issues.
Plans for redevelopment and relocation have made little progress amid a decades-long tug of war between land owners, residents and authorities.
Seoul said Mayor Oh Se-hoon visited the village and asked officials to draw up measures to relocate families affected by the fire.
(With inputs from agencies)