The crash occurred just after 3:00pm, just south of the town, about 60 kilometres north of Adelaide.
Police have closed the main Mallala to Two Wells Road to all traffic.
Major Crash investigators are making their way to the scene.
The Australian Rail Track Corporation said it was a Pacific National freight train heading from Perth to Melbourne.
It said the crash happened at the Old Dublin Road level crossing, which has a stop sign rather than boom gates.
More to come.