The derelict Waipukurau Hospital nurses' quarters are set to be demolished after a large fire engulfed the building this afternoon.
A fire investigator deemed the building dangerous so they were taking steps to demolish the quarters.
A fire spokesman said the fire had been put out tonight but they were still at the scene dampening the building down.
"It will be a long process as the building is severely damaged," he said.
Waipukurau chief fire officer Steve Walker said the fire service were called to the site at 12.27pm to find smoke coming from the second floor and the fire "fairly well involved."
He inspected the extensive damage to the building about 4pm this afternoon.
Fanned by the strong winds, the fire gutted the interior of the building and most of the roof had collapsed.
He said the roof had collapsed in the front of part of the building but it hadn't in the back, but there was a concrete roof underneath the tin roof which created problems for them.
He did not want to send firefighters inside so they had to fight the fire externally.
Mr Walker said the flames were contained within about half-an-hour of the first crews attending but at its height there were 60 firefighting personnel and about a dozen appliances from around the region.
The fire service launched an aggressive external attack on the fire this evening with two aerial appliances - one from Hastings and one from Palmerston North.
Extra water tankers were called to the site as aerial appliances were able to take more water than what the mains pressure there could provide.
Residents and students were being assured that smoke from today's major blaze didn't contain potentially harmful asbestos.
Central Hawke's Bay College went into partial lockdown and streets were cordoned off as strong westerly winds blew a thick smoke from the blaze straight towards the school and hundreds of homes to the east of the building.
"There were initially concerns there could be asbestos in the smoke, however, we've since confirmed [with the demolition company] that there is no asbestos in the areas that are on fire, so the public can be assured that any smoke emanating from the fire is free of the substance," said Mr Walker.
Porangahau Rd resident, Carl Petersen, who lives across the road from the nurses' quarters, was watching the cricket on the TV when his wife came home before 1pm and told him there was smoke coming from the roof of the building.
"[One] end was on fire and it just worked its way down and there was smoke all in the roof. You could see the flames coming through the tiles," he said.
According to Facebook post by Terrace Primary School, "the latest regarding the old hospital fire is that it is considered suspicious and will be guarded overnight and in the morning.
The 3.4ha site had been languishing abandoned for 16 years in the rural town.
A hospital first opened on the site in 1879 and, after being largely rebuilt in the 1960s, it closed in 1999.