More than 90 firefighters battled the blaze at Livestock Supplies, a commercial building in an industrial area on Railway St, after the fire broke out about 6.20pm yesterday.
The fire spewed out thick, black smoke, prompting police to warn residents to stay away from the area and keep windows and doors closed.
Southland Fire area commander Bruce Stubbs said diggers were used overnight to bring down some of the building's walls and roofing in a controlled manner.
That allowed an aerial firefighting unit to work through the night in areas where it was too unsafe to send firefighters into.
Mr Stubbs said the aerial unit was due to leave shortly and only one fire crew would remain on scene.The building was all but destroyed, he said.
"There's quite a bit of devastation here."
However, firefighters had been able to prevent the fire spreading to two adjacent buildings.
"So based on what they found on arrival - which was a well-involved, large property fire - to contain it to just the one building has been an excellent job," Mr Stubbs said.
The cause of the fire was undetermined, but investigators would begin work on the site this morning, he said.
Fire Service shift manager Andrew Norris, of Christchurch, said 11 appliances from Invercargill, Gore, Mataura, Pukerau, Tapanui, Riversdale and Wyndham, as well as a hazmat truck, attended the fire.
Staff from Livestock Supplies said they were not ready to speak, when contacted by the Otago Daily Times last night.
Southern District Command Centre deployment co-ordinator Senior Sergeant Brian Benn, of Dunedin, said police evacuated several houses, bars, cafes, supermarkets and the town's movie theatre because of concerns about the toxicity of the smoke.
Mr Stubbs said a strong easterly wind had made conditions difficult for firefighters.
The wind was blowing in the direction of a building where lpg cylinders were stored, which added to the danger, he said.
The fire was 50-60m in size and the heat had partially collapsed the building.
A Gore resident said the fire was an ''inferno'' and he could smell the smoke from his house about 2km away.
Price Bros Ltd managing director Ewen Price was about to leave his Railway Esplanade business when he saw a ''glow''.
''I sort of looked out and I could see what looked like a flame,'' Mr Price said.
''It took hold pretty quickly. Within 20 minutes or so, it was really under way.''
He believed the easterly wind helped the fire take hold and the building was ablaze by the time the Fire Service arrived.
The fire brought back memories of when his business, which was formerly in Ontario St, next door to Livestock Supplies, went up in flames in 2005.
Gore District Council roading manager Murray Hasler said the area was ''very smoky'' because of the fire.
Mr Hasler was tasked with directing traffic at the Gore bridge after it was closed.
Despite the evacuations and road closures, there had been a continual stream of onlookers, he said.
- additional reporting APNZ
