More than 30 firefighters were sent to W&S Recycling, on the Nuffield Industrial Estate in Poole, at about 15:45 BST.
Black plumes of smoke can be seen coming from the site, near a residential area.
Waste recycling has been affected by the blaze but there are no reports of any injuries, the fire service said. Nuffield Road has been closed.
Six pumping appliances, an aerial appliance and water carrier have been deployed to the scene, it added.
A large fire has broken out at a recycling firm in Dorset.