The vacant hotel went up in flames on Sunday night after a fire began in or near the kitchen, Fire and Rescue NSW said, about 5.30pm.

The fire burnt into the night and was not fully extinguished until after sunrise.

"Most of the building has collapsed within itself," Fire and Rescue NSW duty commander Inspector Peter Nies said. "There are areas that are almost impossible to get to because of the risk of collapse. It is too unsafe."

Inspector Nies said the Fire Investigation Research Unit wrapped up its examination of the property on Monday but was yet to determine how the fire started.

"It seems to be located towards the kitchen," he said of the ignition point.

Witnesses have reported people, potentially squatters, leaving the building around the time the fire began.

NSW Police said a crime scene would remain in place until detectives completed their initial investigation.

The front of the former hotel remained standing on Monday but it will likely need to be demolished in coming days, Inspector Nies said.

Newcastle council engineers assessed the decades-old facade on Monday after it was deemed to be at risk of collapse. The council said further investigations need to take place to confirm the demolition.

The structural integrity concerns will keep Hunter Street closed between Worth Place and Auckland Street on Tuesday. Buses will continue to replace trams and operate via an alternative route.

More than 100 people were evacuated from nearby buildings on Sunday evening when the fire took hold.

Inspector Nies said the fire had been "difficult to access because of the size of the building".

Two of the 40 firefighters that worked to extinguish the blaze were injured in separate incidents. One was overwhelmed by heat and had to be treated by paramedics at the scene before being taken to John Hunter Hospital.

Another fell through a skylight from a height of about three metres and suffered a broken hand. He was taken to the hospital for treatment and will require surgery.

"He was pretty lucky," Inspector Nies said.

The hotel property, which sold for $5.25 million in October, is believed to be owned by 471 Hunter Street Pty Ltd, of which Stanley Xue is the sole director. Mr Xue, of Mosman, could not be reached for comment.

Australian Hotels Association regional president Rolly de With said while the hotel had been closed for quite some time, it was still a "sad day" to see it destroyed.

"In all its forms, the venue has been an iconic part of Newcastle's hospitality landscape for decades and when it closed its doors we certainly lost a piece of our history," Mr de With said.

"It is a definitely a sad day to realise the venue as we knew it, is now gone forever."

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