About 50 people were evacuated and parts of Oxford Street closed after the fire at the two-storey building on Oxford Street between Wentworth Avenue and Crown Street in Darlinghurst about noon, Fire and Rescue NSW and police said.

The fire extensively damaged the second floor, where adult shop The Den Club was located.

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"About noon, we heard fire alarms and fire trucks," said Max Jackson, who works at a business nearby. "We went up to the rooftop and saw plumes of smoke. There was no explosion or anything like that."

Luke McCann, another worker in a nearby business, said there were grey and orange plumes of smoke.

A liquor store is on the first floor of the building.

It was not clear where or how the fire started, Superintendent Ian Krimmer of Fire and Rescue NSW said. A building next door had smoke and water damage.

The fire was under control but would be smouldering for several hours, he added.

One man was treated for smoke inhalation but refused to be taken to hospital, a NSW Ambulance spokesman said.

All citybound lanes on Oxford Street were reopened about 2.25pm, a NSW Roads and Maritime Services spokeswoman said.

Firefighters said six fire trucks responded to the blaze.