Fernley Mayor Todd Cutler said he had reports of damage to at least 300 to 400 homes.
"I think the damages are going to be discovered more and more as we go on through the day," Cutler said.
Truckee River water flowing into the canal was diverted upstream and water in the canal was receding by noon, said Ernie Schank, president of the Truckee-Carson Irrigation District.
"We're still rescuing folks and getting people to shelter safely," said Chuck Allen of the Nevada Department of Public Safety. "I'm hoping the brunt of this is over. We sort of have some control today because it's not raining."
The break might have been started by burrowing rodents, an official said, though the cause wasn't clear.
Ten school buses were used to carry residents to shelters at schools, and bulldozers were brought in to shore up the levee, Allen said.
More than 100 people had gathered at a high school shelter by midday.
"Unfortunately, there are people with damaged houses, people refusing to leave their houses," Cutler said.
The nearby Fallon Naval Air Station provided two helicopters and by midmorning had rescued 18 people.
"Some folks were standing in their driveways and some were on top of their buildings," said Zip Upham, a spokesman for the Navy training facility.
The break came as a storm pummeled the West Coast, raising a threat of mud slides and flooding in California, blacking out thousands of customers and blanketing the Sierra Nevada range with deep snow.
However, Schank said the break may started with rodent burrowing that weakened the canal's earthen bank.
"Evidently it was a rat or a gopher hole. The canal did not overtop the bank," he said.
The irrigation district has a bounty on gophers, said Kate Rutan, an administrative assistant at the district office. "Gophers are terrible for making a hole ... and once (water) finds a weak spot, it will go for it," she said.
The Fernley area had gotten snow plus heavy rain on Friday. The town sits about halfway between Lake Tahoe, where the river originates, and Pyramid Lake, where the canal empties about 100 miles downstream.
"It was a mess up there last night," Allen said. The snow is about 2 inches in depth and the temperatures are right near the frigid mark both for the rescuers and rescuees."
The canal brings water from the Truckee River, starting just east of Reno and running to the farming community of Fallon, about 60 miles away.
In December 1996, flooding from a rupture of an irrigation canal that is part of the Truckee-Carson Irrigation District surrounded about 60 Fernley homes with as much as 2 feet of water.
On Jan. 3, 1997, flooding from the Truckee River swamped motels, casinos and other businesses in Reno and made hundreds of homes uninhabitable.
