One resident said she felt the ground moving beneath her as she ventured into her back garden in Magdalen's Road, Ripon.
Fire crews were called to the street at 22:30 GMT on Wednesday, where they found a hole measuring about 20m (66ft) by 10m (33ft).
No injuries have been reported, with the area cordoned off.
The hole, in the back gardens of two properties, is estimated to be about 9m (30ft) deep.
More on this story and other news in North Yorkshire
Frances O'Neil, said: "I was just going to go down the steps that lead to my garden and realised there were no steps and the ground was moving.
"I turned back around, grabbed hold of a metal pole and pulled myself up and back into the house."
Ben Bramley, who lives in the other affected house, said: "I was a bit drowsy and my missus gave me a shout to say something was happening in the back garden and it sounded like a little landslip.
"I went outside and it was all dusty, my neighbour was out there in a dressing gown and it was a real mess."
Structural experts were called in to help survey the scene.
Mr Bramley added: "It's quite traumatic.. it's very close to our back door and the house, as you can imagine, is uninhabitable at the moment.
"The fire brigade and contractors were saying that it's likely to be structurally unsafe for a period of time, so we would need to move out. We might even be officially homeless."
Ben Cairns, North Yorkshire Fire Service station manager, said: "The area is well-known for gypsum deposits, so it's not the first time we have encountered this - although this particular sinkhole does appear to be quite large."
The fire service said the residents of four of the affected homes would not be able to return to their properties any time soon.
In 2014, a 100-year-old detached house in an adjoining street was demolished after a 25ft-wide sinkhole opened.
The British Geological Survey said Ripon lies in one of the most susceptible areas of the UK for sinkholes because of its "Permian gypsum deposits", which can dissolve more quickly than surrounding limestone.
Eamon Parkin, a landlord at the nearby Magdalen's pub, said he had noticed a visible change in the area's landscape over the past few years.
He said: "Growing up here, I know that it's a problem in Ripon and these things do happen, but where will it happen next?
"If you look over to where the park is, the land is changing over there. It used to be nice and flat, but now you can see a difference in the structure of the land."

A drab first-half saw little goal threat at either end despite the Welsh side dominating proceedings.
In a brighter second period, Wrexham goalkeeper Shwan Jalal pulled off good saves from two Andrai Jones' headers.
The hosts took all three points when right-back Edwards sneaked in to force home a cross from Paul Rutherford on 88 minutes.
Wrexham manager Dean Keates told BBC Radio Wales:  "It was the perfect result. Performance-wise it was not where we wanted to be, but I would say it was all about getting the result today not about the performance.
"They worked hard, it was a bit scrappy, a bit nervy. But we got the goal and it was all about the three points in the end."
Match ends, Wrexham 1, Southport 0.
Rob Evans (Wrexham) is shown the yellow card for a bad foul.
Second Half ends, Wrexham 1, Southport 0.
Goal!  Wrexham 1, Southport 0. Kai Edwards (Wrexham).
Substitution, Wrexham. George Harry replaces Jordan White.
John Rooney (Wrexham) is shown the yellow card for a bad foul.
Substitution, Southport. James Caton replaces Ben McKenna.
Second Half begins Wrexham 0, Southport 0.
First Half ends, Wrexham 0, Southport 0.
First Half begins.
Lineups are announced and players are warming up.
Seven homes have been evacuated after a large sinkhole opened up behind a row of houses in North Yorkshire.
[NEXT_CONCEPT]
A late goal from Kai Edwards gave Wrexham a first win in four National League games as they saw off Southport.