According to the report, the fire hotel Mad Monkey Downtown Backpackers in a popular tourist area emitted black smoke, and the scene was thick smoke.
A spokesman for the NSW Fire Service said the building was "already on fire" when firefighters arrived. Firefighters will soon search the building for people who may be trapped.
An Ambulance NSW spokesman said paramedics had assessed three people at the scene.
A man in his 20s suffered burns to his leg and was taken to St Vincent's Hospital. At 9:17 a.m., the authorities received a report responding to another job at the site.
Police and paramedics are also assisting firefighters. Police were seen directing traffic at Darlinghurst Rd, where barricades remained.
Australia's Channel 7 News reported on October 4 that a hotel in Sydney's inner city caught fire, and dozens of backpackers were forced to flee.
At around 9:15 a.m. on Wednesday, a fire broke out at the hotel in Darlinghurst Rd, in the Potts Point area.
NSW Ambulance told Channel 7 that multiple paramedics were currently at the scene.
Six fire trucks and 22 firefighters are fighting to put out the fire. About 70 backpackers were evacuated.
It was not immediately clear whether anyone was injured. Darlinghurst Rd is currently closed in both directions. Bus 311 is diverting from Darlinghurst Rd.
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