Police and the military have been called in to help in search and rescue operations in Mbale, where stranded residents could only watch helplessly as their belongings were washed away by the floodwaters.
Mbale City resident commissioner Ahamada Waashaki told AFP that nine bodies had been recovered so far, including one of a soldier.
"Many more people are missing and feared dead," he said.
"There is a lot of destruction, roads cut off, buildings submerged as a result of heavy rain that started last night until this morning."
He said the situation became worse when the Nabuyonga and Namatala rivers burst their banks, causing flooding across most parts of the city.
Prime Minister Robinah Nabbanja visited Mbale, which lies on flat land about 300 kilometers east of the capital Kampala.
"Police and military marine forces will be coming to help in the rescue and search for dead bodies as we provide relief to the affected population," her office said.
Two local reporters told AFP they had seen bodies floating in the muddy brown floodwaters before being removed by police.
Several cars were also washed away, along with household goods and personal items as residents moved to higher ground for safety.
"In the past we experienced flooding but not the level of lives lost and destruction of property seen this time," Waashaki said.