The fire broke out early Thursday evening and although it had been contained by the next morning, a blaze below the dock continued to smoulder.
Squamish fire chief Bob Fulton said tide swings were making it hard for firefighters to reach the underside of the dock.
"They're working in an extremely smoky, dangerous environment in sometimes zero visibility, so it's really tough," he said at a news conference.
Fulton said the blaze started on the south end of the dock and pilings treated with creosote helped it spread, but there was no indication of its cause just yet.
More than 60 firefighters responded in addition to crews from Vancouver and Whistler. A Vancouver Fire and Rescue boat was brought in to help, but Fulton said at some point firefighters will need to get in a smaller boat to reach the blaze.
Squamish Mayor Patricia Heintzman said one or two people were admitted to hospital for respiratory issues, but there were no injuries.
An investigation into the fire's cause as well as the district's preparedness is ongoing.
"The first step is to get the fire out," said Heintzman. "Then we need to understand what happened and make sure it doesn't happen again."
At its peak, the fire emitted dark, pungent and toxic smoke. The burning creosote prompted a warning to residents to stay indoors.
Residents had been asked to keep doors and windows closed, turn off ventilation systems if possible and cover their noses and mouths with a wet towel if venturing outdoors.
The warning was lifted Friday morning, but officials said it might need to be reinstated if air quality deteriorated. The district said schools were open, but students would be kept indoors all day.
Heintzman praised the emergency response as quick and efficient and thanked citizens for helping to spread the word on social media.
Kim Stegeman of Squamish Terminals said there was a ship at the dock when the blaze broke out but it did not catch fire.
"It is safe and away from danger," she said. "Everyone who was working on site was accounted for and evacuated."
By Friday morning, thin, clear smoke wafted in the air and extensive damage could be seen on the charred and smouldering dock.
"It's a significant incident for us and we will have to assess," said Stegeman, adding that employees were not working the day shift Friday. "We want to be sure that we can safely get back to work."
A spokeswoman for B.C. Emergency Health Services said four ambulance crews, a helicopter and a critical-care team had been on standby, but no one was transported.
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