A rain-sodden hillside about 300 feet high collapsed onto a neighbourhood on the outskirts of Guatemala's capital, killing at least 26 people and sending 36 to hospital.

Family members have reported 100 people missing, but the number could be as high as 600 based on at least 100 homes in the area of the slide, said Alejandro Maldonado, executive secretary of Conred, the country's emergency disaster agency.

Hundreds of rescue workers used shovels in a desperate effort to reach survivors, pulling one man alive from the rubble of his collapsed home more than 15 hours after the landslide hit late on Thursday.

Julio Sanchez, spokesman for Guatemala's volunteer firefighters, said the dead, including two babies, were carried to an improvised morgue where weeping relatives identified their bodies, and families arrived looking for people who were missing.

Among the bodies, rescuers found a mother embracing her two girls, said Carlos Turcios, a doctor who saw them when he came to help the rescue.

Rescuers called off the search late on Friday because rains made it dangerous for emergency crews, but planned to resume this morning.

The hill that towers over Cambray, a neighbourhood in the suburb of Santa Catarina Pinula, about 10 miles east of Guatemala City, partly collapsed onto a 200 foot stretch of the hamlet just before midnight, burying an estimated 68 homes.

Housewife Dulce del Carmen Lavarenzo Pu, 28, had just returned from church when the wave of mud swept down just 150 feet from her home.

"I heard this terrible noise and everything began to shake," she said. "Everything went black, because the lights went out."

Raul Rodas, an assistant village mayor, said about 150 families had lived in the area where the mudslide occurred, but did not know how many might be trapped.

The man pulled alive from the wreckage, Rony Ramos, 23, was rescued from a home near the edge of mudflow. But at its centre, the landslide buried houses under a layer of rocks and earth as much as 50 feet deep.

Early in the day, Marleni Pu, 25, stood at the edge of the mudslide, her face swollen with weeping.

"My uncles, my cousins, my nieces and nephews are all there," she said, looking across the field of debris where about two dozen relatives had lived.

"Six houses where my relatives lived are all under the hillside now."

Then searchers dug out her relative, Mr Ramos, and took him on a stretcher to hospital. He had apparently been trapped in an air pocket, face down and unable to move.

"When our personnel were searching through the rubble, they heard a voice," said rescue worker Cecilio Chacaj. "They located the man, who was buried about two meters (six feet) under rubble."

He said rescuers worked frantically for five hours with jackhammers and saws to free him.

Some of the untouched homes in Cambray, which sits on the edge of a small river, were abandoned by their owners for fear of further mudslides.