Six fire engines and an aerial ladder platform are at the scene on Tyldesley Road, Blackpool.
More than 20 firefighters are tackling the blaze.
The service raced to the scene at 5.46am.
The fire has engulfed a building opposite the Home Bargains on the road as thick black smoke billows across the town.
Residents have been evacuated from nearby homes.
Lancashire Fire and Rescue Service has urged people to avoid the area.
The road has also been closed between Rigby Road and Princess Street for everyone’s safety.
The fire service have confirmed that the flaming building is derelict.
A statement said: “At 05:46 on the 27th August 2022, six fire engines from Blackpool, South Shore, St Annes, Fleetwood, Bispham and Blackburn along with the aerial ladder platforms from Blackpool and Preston, the stinger from Blackburn and the aerial support unit are currently attending an incident on Tyldesley Road, Blackpool.
“Firefighting operations are underway. If you can see or smell smoke, please keep your windows and doors closed.”
It is not yet known what caused the fire or if there are any injuries.
The blaze comes just after the UK was warned that a heatwave over the Bank Holiday could heighten the risk of fires.
Jim Dale, a meteorologist for British Weather Services, and an expert in weather impacts and safety, said: “Temperatures in southern and eastern Britain could reach 30C over the bank holiday as it now looks like high pressure will take control of the weather.
“It will follow another dry week across much of southern England with temperatures starting to rise from mid-week.
“However, because there won’t be any rain across the south, and with temperatures going back up, we are back into a wildfire situation.”