One Outer Banks resident said he saw the water rise about 18 inches in 90 minutes.
Water levels reached knee-deep in some parking lots and authorities used jet skis for rescues where roads weren't passable.
The storm washed away part of the landmark Avalon Pier that was built in the 1950s.
And water washed over parts of Highway 12, the main artery that runs through the Outer Banks.
But Department of Transportation officials say they don't believe waves breached the highway the way they did last year during Hurricane Irene.
Roads and parking lots turned into rivers and ponds as Sandy swept through North Carolina's Outer Banks Monday.
Some residents told Charlotte TV station WSOC that they didn't think Sandy would pose a serious threat, but now they see it differently.
In Kill Devil Hills, there was a 7 o'clock curfew to keep people off the flooded roads.
Police had to redirect traffic from the main artery through the Outer Banks because of water and sand on the highway.
Sandy made landfall near Atlantic City, New Jersey Monday evening, with winds of 80 mph.