Tropical cyclone Larry smashed into the coastal community of Innisfail, about 62 miles south of Cairns, a popular jumping-off point for the Great Barrier Reef.
A police spokeswoman said the storm had ripped roofs off buildings throughout Innisfail and sent trees crashing across roads.
Police had been unable to leave their station, despite hundreds of calls for help, she said. "Homes are literally crumbling around them."
Weather bureau forecaster Jonty Hall said conditions were "terrible" in the region, and warned of surging coastal tides and gale-force winds along a 186-mile stretch of coast in northeastern Queensland.
"These are extremely dangerous conditions," he said. "It doesn't get much worse than this."
Last night Queensland State Counter Disaster and Rescue Services' executive director Frank Pagano compared the potential force of Larry to Hurricane Katrina, which ravaged the United States Gulf states in August last year, killing more than 1,300 people.
"This is the most devastating cyclone that we have experienced on the east coast of Queensland for decades. There is going to be destruction," he said.
Queensland's state premier, Peter Beattie, declared a disaster situation, giving local authorities the power to enforce mandatory evacuations.
The Bureau of Meteorology had upgraded the cyclone to a category five - the strongest category possible - shortly before it crossed the coast, but then lowered it to a category four after the storm hit land.
Leslie Harris, director of nursing at Innisfail Hospital, said wards had been cleared to make way for possible cyclone victims.
"We haven't had anyone brought in yet but we have taken measures to free up beds," she said.
A spokeswoman for the Queensland Department of Emergency Services said disaster and rescue crews were waiting for the winds to ease before going out to assess the damage.
"It's just a waiting game. At this point we don't know what the extent of the damage will be," said the spokeswoman. "We're very well prepared."
Around 109 people were evacuated from the low-lying areas of Innisfail earlier yesterday as weather forecasters predicted the storm could cause sea levels to rise by up to 13 feet above the normal tides.
Qantas cancelled a scheduled morning flight to Cairns, and another to Townsville - the two largest cities in the cyclone's possible path.
Cairns has a population of 125,000 while Townsville is home to 160,000 people.
The stretch of coast the storm was heading toward includes the tourist city of Cairns, popular with international travellers and the starting point for many Great Barrier Reef boat cruises.