Eric Smallman, owner of the Savoy Hotel opposite the pier, witnessed the blaze.
He said: "Fifty per cent of the pier has actually collapsed - the other 50% is pretty well ablaze.
"The flames are starting to come through what's left of the main building.
"The fire brigade are spraying water on it but apart from that I think there's not a lot else they can do."
He added: "I don't think they're actually attempting to go into the building or anything like that - I think it's just a case of trying to fight the fire from outside."
Sheila Grace, 60, was born in Fleetwood and owns the nearby Sandpipers Hotel on the Esplanade.
The fire started in the early hours. Picture courtesy of Sharon Bailey
She said it was a sad end for the pier: "I know things have changed, but it was the jewel in Fleetwood's crown, everybody headed there and everybody knew it, and in the last few years it has been just nothing."
Businesswoman Diana Christy, 59, added: "A lot of local residents have been saying that it will go up in smoke for a long time because it's been empty and in disrepair for years.
"This is the last thing that Fleetwood needed right now."
Fleetwood Pier was rebuilt in 1953 after being damaged by a fire in 1952.
The blaze on 25 August 1952 started in the cinema and created an inferno that could be seen from 20 miles away.
The attraction was first built in 1910 - the last to be constructed in the "golden age" of pier building, from 1860 to 1910.
It was built with a promenade deck and 600ft long jetty with an ornate oriental-style pavilion, which opened to the public in 1911.
All the buildings on the pier are destroyed. Picture by Chris Morton
The pier continued to remain profitable throughout the declining years of the seaside resort, even receiving a £70,000 facelift in 1972.
But in recent years it has gone through changes of ownership and uncertainty over its future.
The pier was sold to a Lancashire businessman for about £500,000 last year.
Mike Simmons, also known as comedian Joey Blower, had promised a new lease of life for the pier by converting it into luxury apartments.
But hundreds of people signed a petition objecting to the plans.
The blaze comes less than six weeks after a fire destroyed the 104-year-old pier in the Somerset resort of Weston-super-Mare in July.
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