Weather authorities in the west African nation had warned just last week that parts of 21 of the country's 36 states were under a flood warning due to seasonal rains.
The Yobe State Emergency Management Agency (SEMA) said more than 200 houses were damaged, while a local civil servant estimated 500 houses were severely hit following the overnight rains.
No deaths were reported.
Mohammed Goje, executive secretary of the Yobe SEMA, said that response teams were currently in the field and that according to a preliminary estimate some 600 people were likely affected.
"Some (homes) have been completely washed away, some partially washed away, but most of them are not habitable," Goje told AFP, though he added there were only a "few" injuries.
Dauda Magaji, a 56-year-old civil servant and resident of Potiskum, said that more than 500 homes were "damaged completely".
"They left their house crying for help," he said of neighbors who saw everything destroyed.
Recent rains had raised the level of a nearby river, Goje said.
Blocked drainage systemS were exacerbating the flooding, both Goje and Magaji said.
Heavy rains generally sweep through Nigeria between June and November, often triggering dangerous floods where poor infrastructure and inadequate drainage often worsen the impact across Africa's most populous country.
Hundreds were killed earlier this year after a flood ripped through the north-central town of Mokwa, in Niger state. Residents said that culverts were blocked by debris, causing rainwater to build up behind clay walls that eventually gave way.
Scientists have also warned that climate change is fuelling more extreme weather patterns.
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