The South Australian Metropolitan Fire Service issued an emergency warning early on Thursday afternoon for the structure fire at Port Adelaide.
Anyone located within 1km of Moonta Road, northwest of Adelaide's city centre, has been urged to evacuate immediately.
"Do not enter the area - it is extremely dangerous," the fire service said in a statement.
"Emergency services are on scene, the smoke is considered toxic."
The blaze was contained to the shed but heavy smoke continued to track in a southeast direction, it said shortly after 2pm local time.
Fire crews remained at the scene, where they worked to extinguish the fire and manage risks posed by the hazardous materials.
Local resident Chris Baxter said he was alerted to the fire by his wife, who called him in a panic after hearing word of the evacuation order.
"She was scared, she was panicked," he told ABC radio.
"The warning was to grab your medication and your dogs, or your pets, and go."
Tim Whitrow, who witnessed the blaze from his office, told the radio station that smoke appeared to be coming from the site in thick, white plumes.
Those unable to leave the area were advised to close their windows and doors, and be cautious of smoke.
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