Villagers woke up to the sound of roaring and saw a large elephant damaging around 100 buildings, trampling parked cars and motorbikes.
Crowds of people gathered to watch the from balconies and rooftops, and some followed the elephant through the streets from a distance, The Associated Press reported.
"The elephant was scared and was trying to go back to the jungle," said Papaiya Sarkar, a 40-year-old woman who watched the elephant walk down a street near her home.
The elephant had wandered from the Baikunthapur forest, crossing roads and a small river before entering the town of Siliguri in India's West Bengal state.
Divisional Forest Officer Basab Rai said the female elephant appeared to be a loner without a herd, and was likely searching for food when it strayed into the town.
He said it did not attack any people, and appeared to be afraid of them. After several hours, it became clear the elephant was unable to find its way back to the forest.
Authorities eventually shot the elephant three times with a tranquiliser gun and used a crane to lift it into a truck once it had calmed down.
It was then taken to a park for domesticated elephants, and authorities planned to return the elephant to the forest once the effect of the tranquiliser wore off.
Elephant on rampage in India
Elephants are increasingly coming into contact with people in India, as the human population of 1.25 billion soars and cities and towns grow at the expense of jungles and other elephant habitats. In India and Sri Lanka, more than 400 elephants and 250 humans are killed each year.
On Wednesday, another wild elephant trampled a farmer to death in the southern state of Tamil Nadu. The farmer had been sleeping in his paddy field when the elephant appeared, police told Press Trust of India.
India's elephants are also threatened by speeding trains and illegal poachers looking for ivory to sell on the black market. Today, there are about 30,000 elephants across the country, restricted to about 15 percent of their historic habitat, according to the environment ministry.
Worldwide, elephants have disappeared from some 95 percent of their historical range, which once stretched from the shores of the Mediterranean to the Yellow River in northern China.