No one was injured but the London Fire Brigade said it had to send 20 fire engines and 100 firefighters to tackle the blaze at the market in north London, a bohemian area usually crowded with shoppers and people enjoying local pubs and clubs.
The fire devoured the Hawley Arms pub, a popular haunt of celebrities including singer Amy Winehouse and model Kate Moss.
Market storage areas and shops were set ablaze, adjoining houses were damaged and some local residents had to be evacuated as a precaution, the Fire Brigade said.
Throngs of revellers stood in the streets of Camden, a fashion and music hub, watching flames and smoke billowing into the air. By late evening, the blaze had died down but firefighters said they would remain on scene all night.
"The fire is surrounded by our fire crews and they are continuing to try and bring this under control," Fire Brigade spokesman Guy Foster told reporters.
He said the blaze appeared to have started in market stalls.Investigators were at the scene but it was too early to say what had caused it, he said. A police spokesman said there was nothing to suggest the fire's origins were criminal.
According to the Camden market Web site, it is the largest street market in Britain and the fourth most visited tourist attraction in London, with about 500,000 visitors a week.
The market, next to Camden Lock, opened in the 1970s and has grown into a sprawling complex of market stalls, shops, workshops, studios and cafes. Shops sell everything from arts and crafts to designer clothes and antiques.