Huge red plumes topped with black-and-white smoke shot out along the Cumbre Vieja volcanic ridge during the eruption on Sunday.
Scientists had been closely watching following the accumulation of molten lava below the surface and days of small earthquakes.
La Palma, with a population of 85,000, is one of eight volcanic islands in Spain’s Canary Islands archipelago off Africa’s western coast.
More than 5,000 people had already been evacuated last night , but Spain’s Civil Guard said it may need to evacuate up to 10,000 residents.
Authorities had begun evacuating the infirm and some farm animals from nearby villages before the eruption at 3.15 pm local time on a wooded slope in the sparsely populated Cabeza de Vaca area, according to the islands’ government.
Two hours later, with lava edging down the hillside from five fissures torn into the hillside, the municipality ordered the evacuation of four villages, including El Paso and Los Llanos de Aridane.
Spanish Prime Minister Pedro Sanchez cancelled his trip to New York to attend the UN General Assembly so he could travel from the mainland to the Canary Islands amid the crisis.
After nightfall, video footage showed fountains of lava shooting hundreds of metres into the sky, and at least three rivers of molten rock pouring down the hill.
One stream, several hundred metres long and tens of metres wide, crossed a road and began engulfing scattered houses in El Paso.
The lava eventually reached some homes, causing at least one chalet with a tower to crumble.
Authorities warned that the lava flows could also threaten the municipalities of El Paraiso, Alcala and surrounding areas.
Itahiza Dominguez, head of seismology of Spain’s National Geology Institute, told Canary Islands Television that although it was too early to tell how long this eruption would last, prior “eruptions on the Canary Islands lasted weeks or even months”.
The last eruption on La Palma 50 years ago lasted just over three weeks. The last eruption on all the Canary Islands occurred underwater off the coast of El Hierro island in 2011. It lasted five months.
Volcanologist Vicente Soler, of Spain’s Higher Council, said “the material appears to be very fluid, the lava flows will reach the sea sooner or later”.
The scientific committee of the Volcano Risk Prevention Plan said part of the island’s south-west coast was at risk from landslides and rock falls.