Images from the scene showed bulldozers and heavy diggers moving debris and boulders that swept into a valley, blocking a 2-kilometer (1.25-mile) section of river. Some 400 people are reported to be taking part in the rescue efforts.
A spokesperson for the Maoxian government said in a statement that emergency crews were responding "to a first class catastrophic geological disaster."
"There are several tons of rock," police captain Chen Tiebo told the state broadcaster CCTV. One rescue worker told the broadcaster that an estimated 3 million cubic meters (105 million cubic feet) of earth and rock had slid down the mountain and buried the town. That would be enough to fill more than 1,000 Olympic swimming pools.
Xinmo had about 40 homes and relied namely on tourism. It remains unclear whether tourists were in the village when the mountainside collapsed.
The Sichuan province is also known to be prone to earthquakes. In 2008, nearly 70,000 people died when an 8.0 magnitude tremor hit Sichuan's Wenchuan County.
As many as 500 rescuers are searching for survivors