About 300 wooden pallets caught fire close to a backyard of a house in Ashley's town centre at about 9pm on Thursday, November 7.

Four NSW Rural Fire Service units were deployed to the scene, along with crews from Fire and Rescue NSW.

NSW Rural Fire Service Namoi Gwydir district officer Steve Carstens said it took crews about two to three hours to extinguish the fire.

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"The pallets were stacked for storage and they somehow caught fire and due to the dry conditions, pallets of wood stacked up and the wind, it just took off," he said.

Resident Michael Ivanov was passing by when he saw the blaze, and said fire crews did a great job putting it out.

"I thought it was a house fire to start with," he said.

"A petrol drum went up - it was lucky it blew up and not out. But the fire brigade stopped a car from blowing up."

Mr Ivanov said the blaze damaged the car, as well a shed, fences and "a bit of gear".

At this stage, NSW RFS is unsure of how the fire started. Investigations are continuing.