Firefighters are tackling a blaze inside a Sydney hotel near crowds of spectators who have gathered to watch New Year's Eve fireworks.

A NSW Fire and Rescue spokesman told AAP an automatic fire alarm went off alerting firefighters, but it is unclear what part of the Four Seasons Hotel near the Harbour Bridge is alight or how the fire started.

Five fire trucks and about 20 firefighters are at the George Street hotel in the iconic Rocks area, the spokesman said.

Photos on social media show thick smoke billowing out of the building.

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