North Yorkshire Fire and Rescue Service said crews were called to the Mallyan Spout Hotel in Goathland, near Whitby, at 2.38pm on January 4 and that the building was "well alight" when they arrived.
Firefighters have now confirmed that the blaze began in a laundry room, which caused substantial damage as well as some smoke damage to the building.
Fire crews from Scarborough, Whitby, Goathland, Robin Hood's Bay and Lythe were all called to the scene and used an aerial ladder platform and hose reels to extinguish the flames.
It is now believed that the cause of the fire was accidental from a dryer, fire officers said.
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The owners of the three-star hotel said all guests and staff were safely evacuated from the building to the nearby The Inn On The Moor and that no one was injured.
In a statement, the owners said: "Until we can assess the damage and see what we are up against we will be closed until further notice.
"We will be contacting anyone who has reservations with us. We thank everyone for their well wishes and of course our amazing fire service and a massive thank you to The Inn On The Moor for looking after our guests. Also to our staff, you are simply outstanding and we love you all."