The fire started in The Party Shop in Gladstone Street about 10.45am. The building also houses Barlens Party Hire and The Tables and Chairs stores.

ACT Ambulance paramedics helped five patients with minor smoke inhalation, but they did not need to be taken to hospital. There were no other injuries and everyone was evacuated from the building.

The fire was brought under control about 12.15pm by firefighters working from the front and back of the building and was extinguished at 4.30pm.

ACT Fire and Rescue planned to keep one fire pumper at the scene overnight.

Earlier, clouds of black smoke were billowing out of the building and across parts of Fyshwick.

ACT Fire and Rescue Commander Leigh Curtis said the fire started in the shop's back room.

"On arrival there was a fire in the back room of the party shop and everyone was evacuated," Mr Curtis said.

He said the crew had been forced to fight the fire defensively as it was "very intense" and the toxic smoke made it "extremely dangerous" for firefighters.

ACT Fire & Rescue sent four fire pumpers and 30 staff to the site, as well as the Bronto aerial firefighting appliance.

The shop was extensively damaged, Mr Curtis said.

"The party shop side of the building is significantly damaged, the rest of the premises, the Barlens shop and the table shop on the other side are smoke- damaged but we stopped the fire from getting into that side of the building."

The visibly upset owner of The Party Shop was consoled by fellow business owners watching on opposite the building as the fire burned.

Also looking on was Luke Warrener, the owner of the next door Barlens Party Hire, who said he called 000 after an alarm went off. Staff evacuated the building when strong-smelling smoke started appearing.

The inside of Barlens customer service and show room areas were also damaged. .

Stephen Houghton, who works nearby, said he had heard crashing glass and crackling about 10.55am.

"It is nearly all plastic inside, so it smells," he said.