Webcam footage shows a fire engulfing 'The Eagle's Nest,' a former Nazi guest house used occasionally by Hitler.
Police say they detained a man near the site and are investigating the cause of the fire.
Built in 1938 as a guest house for Nazi officials and their guests, the building sits in a spectacular Alpine setting above Berchtesgaden.
Adolf Hitler used it occasionally, earning it the nickname "Hitler's Tea House." It is separate from his nearby summer residence, the Berghof.
Bild newspaper quoted a police spokesperson as saying the building, preserved after World War Two as a historical monument linked to the Nazi era, had been so badly damaged that it "could probably not be saved."
Police said earlier they had detained a man near the site but had not yet established the cause of the fire.
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