Firefighters are expected to be at a blaze at a three-storey apartment block for hours to ensure it is under control.
They were called to the fire opposite the Red Dragon Pub on Main Street in Kirkby Lonsdale, Cumbria, at 5:45 GMT.
David Love, area manager for Cumbria Fire and Rescue Service, said emergency services would be in the area most of the day and a cordon was in place.
Nearby residents have been evacuated from their homes and reception centres set up at the Methodist Church in Queen Square and the Lunesdale Hall and Kirkby Lonsdale Institute.
Mr Love said: “In the next few hours we should have the fire surrounded and we’ll have an emergency service presence in Kirkby Lonsdale for the best part of today.”
He asked people to avoid the area, as crews using 10 fire engines and two aerial platforms continue to work to control the flames.
The road was “likely to remain closed for some time”, Cumbria Police said.
The town’s Christmas markets have been cancelled due to the fire.
