A fire at Postie in Mosgiel has now been extinguished but firefighters are still at the scene to ensure no further flare ups.
Firefighters were called to the scene of the Gordon Rd blaze at about midday.
A reporter at the scene said there was quite a bit of smoke billowing out from the front of the building.
Firefighters were seen putting on breathing apparatus and getting ready to head inside just before 12.40pm.
A witness said she believed the fire began in the kitchen upstairs.
A Fire and Emergency NZ spokesman said fire trucks from Mosgiel, Outram, Roslyn, Dunedin, and St Kilda were at the scene.
The fire was believed to be "relatively small'', but because of its location firefighters had trouble getting to it, he said.
