Land was continuing to give way due to rain that has soaked the area in recent days, said the mayor of the southern hill town of Niscemi.
No deaths or injuries have been reported following the landslide, which took place on Sunday.
"The situation continues to worsen because further collapses have been recorded," mayor Massimiliano Conti told local news on Monday.
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Footage taken on Monday by the Local Team video agency showed a narrow vertical section of cliff falling away, causing a building that had already been ripped apart to further collapse.
The front end of a car was visible next to it, its two tyres suspended in the air over the edge of the cliff.
The landslide covered the road below leading into town.
Conti said local authorities were working with police, fire and civil protection units to assess the next steps, including the resumption of school, which was cancelled on Monday.
"The situation is dire," said the mayor.
Italy's civil protection unit said all residents in a four-kilometre radius of the landslide had been evacuated.
Niscemi, which has a population of more than 27,000 people, is located about 28 kilometres inland from the southern coastal city of Gela.
Coastal areas of Sicily were hit last week by Storm Harry, damaging seaside roads and residences.
The region's president, Renato Schifani, estimated the cost of the damage cost at 740 million euros ($876 million).
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