Firefighters have been battling flames in the dry lake bed at Eagle Lake, which sits northeast of Britt in north-central Iowa.
Firefighters from Britt and Garner returned Thursday after being called out twice overnight.
Lynn Davis and Lois Whipple told Mason City television station KIMT that flames came within feet of their house.
Area resident Matt Anderson says firefighters devised a fire break on the west side of the lake bed to protect homes and cabins. No structures were damaged.
Britt Fire Chief Pat Trulson told the Mason City Globe Gazette that the lake bed is dry because of the drought and has become a peat bog that will keep burning for weeks. Trulson says passers-by will be seeing smoke in the area.
The fire cause is being investigated.