There was no immediate report of casualties, and the cause of the fire was unclear.
The blaze broke out at 1.27am in the ancient Tibetan town of Dukezong, which dates back more than 1,000 years and is known for its preserved ancient streets, structures and Tibetan culture. It is part of the scenic Shangri-La county in Deqen prefecture.
The county was once called Gyaitang Zong, but officials changed its name in 2001 to Shangri-La, hoping to draw tourists by the reference to the mythical Himalayan land described in James Hilton's 1933 novel. The county has since benefited from tourism revenue.
Photos and video footage showed the town engulfed in flames that turned the night sky red.More than 2,000 firefighters, soldiers, police, local officials and volunteers responded to the blaze and brought it under control around 11am, the Shangri-La county government said.
More than 100 houses in Dukezong were destroyed, local authorities said. Most of the structures were made of wood and the fire spread easily because of dry weather, media reports said.