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A wildfire burns outside Boulder, Colo., on Wednesday. It has destroyed more than 130 homes. ((Matt McClain/Associated Press))

A wildfire burning in the canyons and steep mountainsides near Boulder became one of the most destructive blazes in Colorado history Wednesday as authorities said it had destroyed at least 135 homes in just three days.

The dire assessment came on the same day firefighters were able to contain about 10 per cent of the blaze that has scorched about 2,500 hectares.

Firefighters encountered rattlesnakes, downed power lines and combustible propane tanks and struggled to get an upper hand on the inferno.

The Boulder County sheriff's office said 135 homes have been destroyed — a toll likely to rise as the blaze rages on and firefighters get a clearer picture of the damage.

About 3,500 people have been evacuated from about 1,000 homes stemming from a fire that broke out in a parched area near Boulder on Monday.

Residents of four neighbourhoods will be allowed to return home Thursday morning. It wasn't clear how many homes that involves.

No injuries reported

Four people remain missing as some residents have stayed behind and risked their lives to try to save their homes.

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A Sky Crane Tanker Fire Helicopter drops water on the front of the Fourmile Canyon fire in Boulder, Colo., on Wednesday. ((Associated Press))

No deaths or injuries have been reported and the cause of the fire was not known.

The fire west of Boulder is not large but it struck in a populated area and inflicted major property damage.

The reported loss of homes surpasses that of the 2002 Hayman fire in southern Colorado that was the most destructive in the state's history. That fire destroyed 133 homes and 466 outbuildings over 54,000 hectares in a more sparsely populated area that included national forest land.

Todd Richardson, incident commander, told a crowd of about 600 at a public meeting Wednesday night in Boulder it has cost $2.1 million US so far to fight the fire.

Firefighters took advantage of cooler temperatures and light rain to attack the wildfire Wednesday but authorities acknowledged they still don't have a good handle on the blaze.

Air tankers dumped retardant on the fire and crews began building containment lines on the eastern side of it. The large plume of smoke the fire had been producing since it started has dissipated because of favourable weather.

However, the fire was still actively burning and threatening structures, forcing a retreat by some deputies doing an inventory of the damage.

Fire managers said as many as 500 firefighters and support personnel are at the fire and more are on the way.