The first floor of the two-storey brick structure was already on in flames when crews arrived after 5:30 a.m.
RCMP say the cause appears to be suspicious and have a person of interest in custody.
Arson investigators are on scene and structural engineers are being consulted to determine if the building is safe to enter.
It's the second major fire to hit the community in recent years.
In March 2012, the Grand Forks Hotel burned to the ground after it was set on fire. (CKIZ, CHBC-Global)