Residents along Wollombi Brook have been told to move to higher ground as the State Emergency Service issued an evacuation order Tuesday evening.
Residents of Wollombi, Congewai, Paynes Crossing, Laguna, Bucketty, Ellalong and Millfield have been told to move to higher ground, the SES said in a warning issued just before 5pm.
"Storm and flood impact have interrupted essential services such as electricity, phones, internet, water and sewerage," the service advised.
Flood levels had been reported to have reached 12.2 metres Tuesday evening with warnings it could continue to rise to more than 13 metres.
It follows earlier reports that flood waters inundated the Wollombi Tavern, with an extraordinary photo showing the effects of the severe weather lashing the region.
Floodwater entered the Hunter pub and was climbing towards the height of the bar just after lunchtime, owner Chris Books told the Newcastle Herald.
Mr Books said the rain had eased in the small tourist town, but he had heard of at least three homes that had been overrun by floodwater on Tuesday.
Meanwhile, the Putty Road has been closed in both directions Milbrodale and Colo Heights roads after landslide blocked the way. Southbound drivers have been diverted at Milbrodale Road, while northbound drivers were sent via Colo Heights Road.
Drivers travelling between Sydney and Hunter Valley are advised to use the M1 Pacific Motorway, the NSW Transport Management Centre has advised.
There has also bee reports of flooding across Main and Cessnock roads between Redwood Drive and Avery Lane with diversion in place.
