Southern Fire Region fire safety officer Barry Gibson said had the Arrowtown Volunteer Fire Brigade not responded as rapidly as it did, the damage to the historic building could have been "devastating".
The historic part of the building had not been damaged, he said.
The fire was detected by restaurant staff, who were seated at the rear of the building, off Arrow Lane.
Mr Gibson said the building did not have smoke alarms or a sprinkler system.
The staff who saw smoke investigated the upstairs storage area within the category two New Zealand Historic Places Trust building and found a fire in a clothes drier.
Patrons and other staff were quickly evacuated and the Arrowtown fire brigade arrived in just over three minutes.
Acting chief fire officer Mark Woodham said firefighters, within another five minutes, would have been unable to save the building.
The fire was contained in the storage area.
Mr Gibson said the restaurant owners were "very lucky".
"We believe there was some plastic component, maybe in one of the pockets of one of the garments [in the drier]. We've still got to look further into what that might be."
An extractor flue and an open window had helped release the smoke, Mr Gibson said.
"This is a good time for other business owners around the place to have a look at what they're doing.
"It could happen anywhere and the devastation that would occur if this fire had been found later, like at 2am . . . our belief is that it would have been devastating to the community.
"This is a unique environment here. If this was lost, you couldn't recreate it. It could have been devastating for Arrowtown.
"Our message is to look at making sure that the premises are safe and the habits are such that fires will not occur."
All building owners should ensure smoke alarms and sprinklers were set up in such a way they could be monitored.
