The fire ignited in a ravine in a mountainous area around 8:30pm on Saturday (3:30 Sunday AEST) and spread quickly, the Fire Service said.
It spread to the plains, burning mostly through brush, and while no homes have been damaged but several businesses were on fire, the service said.
Residents of the small settlements of Anthoupoli, Filothei and Galini were notified by text to evacuate.
Also evacuated was a facility housing 157 people with special needs. Those who could walk, about 120, were being sheltered in a gym, while the rest were housed in a psychiatric hospital, local authorities said.
Around midnight, the Fire Service announced that a 76-year-old man was arrested on suspicion of starting the fire.
He "appeared not to be sober," the Fire Service said.
Residents of Thessaloniki could see the flames and even heard explosions as flammable materials inside the businesses were set on fire. A heavy cloud of smoke blanketed several suburbs and western areas of the city itself.
About 115 firefighters and 38 fire engines battled the fire plus an unknown number of volunteers, the Fire Service said. Firefighting planes briefly engaged but they do not operate in the dark.
There is no indication that the fire is directed to the city itself, but firefighters remain on alert and more were expected to join. Strong winds blowing locally make it difficult to contain the fire.
Greece, with its long, hot, dry and often windy summers, is no stranger to wildfires.
The first major wildfire hit on Wednesday in central Greece, killing a father and his 12-year-old son and prompting evacuations. Greece has also been spared, so far, the extreme heat that engulfed much of the rest of Europe.
Additional blazes were burning around Thessaloniki on Saturday, including in the Halkidiki Peninsula, a favoured holiday spot, and the city of Kilkis to the north.
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