The cause of the crash is unclear, but nobody was injured, with 18 passengers aboard the Melbourne-bound V/Line run which left Albury at 5.20pm.

The drama unfolded about 5.45pm with wagons on the northbound cargo train reportedly uncoupling and striking the side of the V/Line carriages.

A huge noise alerted nearby Barnawartha resident Stephen Sessions to the goods train's woes.

"I just heard a big bang and daughter Jasmine saw it go past the front of our house dragging a shipping container and then it's had a decent sort of a bang and lost the shipping container onto the tracks," Mr Sessions said.

"We've come and investigated and had a look down the track there and it's all on fire."

Wodonga police Inspector Paul Hargreaves said investigations had begun with specialist Melbourne transit detectives notified.

"Just from looking at the scene, we're very, very lucky that people have come out without any significant injuries," he said.

The crash occurred just south of Barnawartha's more Havelock Street railway crossing which takes cars off the Hume Freeway into the town.

The freight train's wagons came to a standstill over the crossing and Inspector Hargreaves predicted a lengthy clean-up, only specifying it would be at least 24 hours.

The Australian Rail Track Corporation, which is responsible for the line, stated "the site will be quarantined for attendance by independent safety regulators and for incident investigations".

Former Barnawartha Victorian Farmers Federation branch president John Stivens said there had long been complaints about the rough surface at the Havelock Street crossing to rail bodies and Indigo Council.