Smoke billowed from the windows of historic Hove baths on Friday afternoon.
Firefighters were called to Medina House in Kings Esplanade just after 3.50pm when smoke was spotted streaming from gaps in the boarded-up windows.
About 150 people watched the scene unfold at the former Turkish Bath and hospital.
Last night Sussex Police were not ruling out arson.
Mystery Eye-witness Michael Ireland, researcher to MP Mike Weatherley, said: “Police closed the road because one of the fire engines was on the pavement.
“The building looked like it was smouldering and there was lots of smoke coming out when the boards were pulled from the building.”
Peter Marroccos, 50, works in Marroccos, the Italian restaurant next door to Medina House.
He said: “There was lots of smoke coming from the front.
“We were quite lucky we didn’t have any smoke or the smell of smoke coming into the restaurant as the smoke was kind of billowing outwards towards the sea rather than sideways down the road. I was quite concerned when it first started as I was worried we would have to close the restaurant for the day.
“Thankfully we didn’t. It has been hard with the long winter, so any nice day we really have to push ice cream sales.
“We had a big queue before the fire started.
Then some customers went to have a look across the road.”
Mr Marroccos praised the emergency services for their swift response to the incident.
He said: “They were very quick to respond, it took them no time at all, literally just five minutes.
I think it’s a mystery how it started because it has been closed up for so long.”
The former slipper baths and launderette has been the subject of a number of refused or withdrawn planning applications in the last ten years. The two most recently rejected bids sought to demolish the listed building.
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