The fire appears to be in the vacant derelict building formerly occupied by Silt Side Services between Stells Lane and the Quayside Hotel.
London Road and High Street have been closed by police while emergency services tackle the flames.
Police have advised people to avoid the area.
A Lincolnshire Fire and rescue Service spokesperson said: “We have nine appliances there or en route at the moment including both aerial ladder platforms and a command support unit.
"We got the call at 3.52pm and reports said it was a derelict building, but we do not know more at this stage.”
The Quayside Hotel has been forced to closed due to the fire next door.
It has put out a message to customers: “A large fire has engulfed the building next door to our hotel, therefore until further notice, our hotel is closed.
“Our team are working hard to find alternative accommodation for all guests who are booked tonight.
“Please bear with us as we source alternative accommodation for tonight.”
- More updates as we get them.