The unidentified man in his late 30s was arrested Saturday.
Authorities said officers were called to a Motel 6 located in the 5100 block of Century Boulevard around 10 p.m. Friday after guests reported loud banging coming from a room in an upper floor.
When police arrived, officers said the mentally unstable man set the room on fire, and then climbed down some balconies to the second floor, where he threatened to hurt himself with a knife.
He surrendered to police about two hours later.
Guests were evacuated from the hotel as Los Angeles County Fire Department crews put out the fire, which had activated the hotel's sprinkler system.
Firefighters were able to extinguish the fire in his room before it spread.
No one was hurt.
City News Service contributed to this story.