A hotel in Germany's picturesque Moselle wine valley collapsed overnight, killing two people, local police said on Wednesday, as rescuers worked urgently to extricate the two remaining guests who were trapped in the rubble.

One woman's body was recovered but emergency responders have not yet been able to reach the body of the second victim, a male, rescue operation chief Joerg Teusch told reporters.

"Five people have been rescued, none with serious injuries", Teusch said, in a complex operation as the two-storey building was unstable after its upper floor caved in late on Tuesday.

The two people still stuck in the building, which was built in the 17th century and renovated in the 1980s, have serious injuries but are in touch with rescuers, according to police.

Among those rescued was a two-year-old child, who was not injured, and the child's parents, with whom rescuers were able to establish contact overnight.

"I have never been so happy to see a stranger's child," Teusch said, describing the tearful moment when his team carried the toddler from the damaged building.

The cause of the accident was not yet clear. Investigations would begin once the rescue operation was complete, state prosecutor Peter Fritzen said.

Summer season

Some 250 police officers, firefighters and paramedics were deployed to the site in the town of Kroev, a popular holiday town surrounded by the steep, vineyard-covered banks of the river Moselle.

Emergency services used a crane and sniffer dogs to assist the operation.

The incident comes during the busy summer season when the region's historic wine taverns are often full of tourists.

The hotel that partially collapsed — identified by a Reuters witness as the Reichsschenke "Zum Ritter Goetz" — is named after a medieval knight who is said to have once drunk at its wood-panelled tavern and has been immortalised in a play by Wolfgang von Goethe.

Investigators believe 14 people were in the hotel when the upper floor caved in, five of whom escaped without injury.

Police also said 21 people in homes near the hotel had to be evacuated, revising down their earlier figure.