A LARGE grassfire is threatening homes in Townsville as extreme fire conditions continue in north Queensland.

Firefighters are creating fire breaks near homes at Mt Louisa to protect them from the blaze burning at the top of a hill.

Timbury Way, on the Bohle side, and Thorn Street, on the Kirwan side are affected, the Department of Community Safety says.

A large smoke haze has blanketed the surrounding area and the department is warning motorists to avoid the region.

North Queensland is currently in the grip of extreme fire conditions, with continuing high temperatures and reduced humidity.

The Queensland Fire and Rescue Service has banned all fires and warns the danger will continue in coming days.

"These are extreme conditions and they make fighting fires very challenging - prevention is the key," northern region rural operations manager Ken Beasley said in a statement today.