Local resident Nick Crossfield captured footage of smoke rising from the jail
About 400 prisoners are involved in a disturbance at a prison in Rutland.
The Prison Officers Association (POA) said riot-trained officers had been called to the incident at HMP Ashwell, which started on Friday.
A Ministry of Justice spokeswoman said there had been "concerted indiscipline" from a number of prisoners at the category C jail.
A three-mile police perimeter has been set up around the jail near Oakham and fire engines remain outside the prison.
The BBC's Barnie Choudhury said it is understood some prisoners have been transported out of the jail - just after noon a prison van left with loud banging coming from inside.
Only residents are being allowed to pass through the police cordon around the site.
Colin Moses, national chairman of the POA, said the association had warned that this type of disturbance might occur.
He said: "The current prison population and lack of appropriate prison places has resulted in prisoners being transferred away from their homes and put in lower category prisons resulting in more drugs, violence and gang cultures in our prisons.
"The drive for savings has led to fewer staff, a reduction in regime and offending behaviour programmes being cancelled. End result unhappy and bored prisoners."
We don't feel threatened and it's normally quite peaceful
Resident Nick Crossfield
Shadow Justice spokesman Edward Garnier has called upon the government to rethink the way it accommodates prisoners.
"My experience is that our prisons are woefully overcrowded. That is the rock upon which the prison system is floundering at the minute.
"Because of overcrowding, category B prisoners - that's to say, the most serious prisoners - are being pushed down into the category C estate and category C prisoners are being pushed out to early into the open prison estate.
"This is not leading to a healthy management of the prison system."
A Ministry of Justice spokesperson said that Ashwell was not overcrowded and only housed category C prisoners.
"Prisoners are categorised according to their risk and held in the most appropriate location after a thorough assessment.
"It is simply untrue that HMP Ashwell, a Category C prison, is holding any Category B prisoners."
Nick Crossfield, who lives near the prison, said there was a lot of police activity at the site and he could hear inmates shouting. He said: "We don't feel threatened and it's normally quite peaceful.
"We don't normally get this kind of activity around here."
Jim Harrison, who drove by the scene earlier, said: "I saw a lot of fire engines there, a lot of police officers.
"There are also police officers stood around the edges of Oakham."
The prison, built on a former Army camp, started as an open prison in 1955 and was converted to a category C jail in 1987.
It has a maximum capacity of 619 inmates and is one-and-a-half miles from Oakham.
In 2003, computers, office equipment and windows were smashed by four prisoners who barricaded themselves into a room at a Leicestershire prison.
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