Rescue workers have resumed a search for hundreds of people still missing two days after catastrophic flash flooding hit the border between Nepal and China.

Their efforts were briefly put on hold on Friday after a lake formed by debris began overflowing, threatening areas already devastated by the disaster.

"We have received a notice saying that the lake has broken its banks," Narendra Pariyar, the most senior bureaucrat of the hard-hit Rasuwa district, told DW. "We can see that the level of water in the river is rising."

Residents in Nepal's border district of Rasuwa were seen fleeing up hillsides as they braced for a surge in river levels, Reuters reported.

Authorities later said the threat had eased but that they were closely monitoring the situation.