Fire crews are battling a fast-moving bushfire close to one of Western Australia's most popular tourist towns.

An emergency warning has been issued for the bushfire near Denmark on the south coast with a threat to lives and homes.

The bushfire is moving fast in a south-westerly direction in steep terrain at Shadforth, a semi-rural area just west of the Shire of Denmark.

Officials say the fire is out of control and unpredictable.

It comes as temperatures soar across the region with gusty winds forecast.

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The Department of Fire and Emergency Services (DFES) said people in an area bounded by McLeod Road, Point Hillier Vista and Limbourne Road were "in danger and need to act immediately to survive".

People are urged to leave the area if the way is clear and to not "wait and see — leaving at the last minute is deadly".

Residents who live in the area have been told not to return home. 

Matthew Beaton, the general manager of The Dam restaurant near the South Coast Highway, said the fire had generated was a large plume of smoke.

"We just got our fire hoses ready and we're just making sure our fill-up points are clear," he said. 

A watch and act is in place for people in an area bounded by McLeod Road to the north and west, South Coast Highway to the south and Happy Valley Road to the east.

The bushfire started near the intersection of Bayview Rise and McLeod Road at 9.25am.

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