The blaze broke out around 5 p.m. Friday at the Alaska Hotel and quickly blanketed the downtown in black smoke.
Mayor Mike Bernier said no one really knows when the old wooden structure was built, although it was believed to have been around since the late 1920s or early '30s.
"Last night it was quite an emotional time for everybody because people who have lived here for a long time, they were basically hugging and were quite upset," he said Saturday.
"Most of the newer people in our town, I think, saw that and it gave them an idea of how important it really was."
He said the cause of the fire does not appear to be suspicious.
The hotel's claim to fame goes back to about 70 years ago, when many among the 12,000 American army troops who helped build the Alaska Highway would quench their thirst at its pub, Bernier said.
"We have some historic pictures of lineups down the street just so people could get in to buy a beer on their shift off," he said.
A couple of decades ago, the owners restored the hotel and painted it bright green, red and yellow, Bernier said of the structure that was a huge draw for tourists.