The five-alarm blaze erupted shortly before 10 p.m. at 400 North Street, where the Metropolitan apartment complex was still being built.
Stunned Raleigh residents and visitors poured out onto sidewalks and streets as the inferno filled the area with heavy smoke. The smoky haze is expected to linger for days.
"It was massive. It looked like the entire block was one fire," a downtown business owner and resident named Patrick told WTVD-TV.
The blaze forced the evacuation of nearby businesses and residential buildings, as well as road closures.
Eyewitnesses said it appeared the fire originated on the second floor, though police and fire officials had not yet made such a determination.
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No one was living in the building at the time, but there are numerous buildings nearby, including other residential apartment units.
A crane used at the construction site collapsed minutes after firefighters arrived.
The fire was under control by 1 a.m., with crews still spraying the charred structure with water to extinguish any hot spots.
The fire was so large that the smoke was visible on WTVD's First Alert Doppler XP radar.
The wood construction of the Metropolitan apartment complex made fighting the blaze challenging.
"They immediately tried to put water on it, but as they approached they noticed it was a lot of heavy fire," Raleigh Fire Department Assistant Chief Brad Harvey said. "Especially under construction -- the wood is not protected and the fire moves very rapidly. We're very fortunate tonight."
A man who lives directly across the street from the construction site said he became concerned as he saw what began as a small fire quickly escalate.
He told WTVD that he was at a downtown Raleigh establishment and tried to return to his apartment because he was worried about his dog.
"I tried to make my way back into the building and I couldn't get back in. The police and the fire department were evacuating people and they wouldn't let anyone else back inside," the man said.
Former North Carolina Gov. Pat McCrory tweeted late Thursday night: "Sec. Kluttz and husband got out of building near #RaleighFire. God bless the firefighters and first responders. Praying for their safety!"
Two William Peace University students said they had to park off campus when they were returning from the gym because the streets were blocked off.
The students said several friends and co-workers were calling and texting them to make sure they were OK, a scene repeated countless times in downtown Raleigh on Thursday evening.
Some people who lived south of the building were bringing in items from their balconies and watching out for hot embers blowing toward their homes.
Eyewitnesses told WTVD it took only a few minutes for the fire to develop into a massive blaze that engulfed the building.
"I heard a bunch of sirens," a woman who lives said. "I looked around me and everything was orange."
Another downtown Raleigh resident said the flames "were pretty intense and pretty hot, and the whole building went up in about 10 minutes."
A church on the corner of Salisbury and Hillsborough streets offered to shelter anyone displaced by the fire.
The cause of the incident was unknown.