No injuries are reported and a fire service spokesman said the priority was to "stop the fire spreading".
The hotel - which is famously where Princess Diana spent her last night - is currently closed for renovations and there are no guests staying there.
The alert was raised at 06:00 local time (05:00 GMT) and about 60 firefighters and 15 fire engines were sent to the scene.
Paris police tweeted that there was a "major fire", and advised motorists to avoid the Place Vendome area.
The area was blocked off at the height of the morning rush hour, while firefighters on cranes sprayed the flames.
Fire captain Yvon Bot said the fire was unusually difficult to access and control.
Princess Diana was staying at the hotel when she was killed in a car crash in 1997. She was there with Dodi Al Fayed, the son of the hotel's owner, Egyptian billionaire and Harrods owner Mohamed al-Fayed.
It was also the hotel of choice for Charlie Chaplin, Coco Chanel and Ernest Hemingway.
It was due to re-open later this year after a three-year closure for renovations.