Fire and Rescue NSW used at least 23 fire appliances, including aerial platforms, to put out the fire that broke out at a building on Good Street in Granville about 3.45am.
Crews battled flames as high as 10 metres to prevent the fire spreading to vacant shops next door.
“Crews are continuing to monitor the site’s instability and potential hotspots,” FRNSW said in a statement.
“NSW Police and Fire Investigators will work together to determine the cause of the fire.”
The charred building was deemed structurally unsound and will be brought down.
A 42-year-old man was arrested at the scene and he was taken to Granville Police Station where he is assisting police with inquiries.
At this stage no charges have been laid.
Parramatta Road was closed off during the fire but has since reopened.