Twelve fire engines had to be rushed to the spot to douse the flames. No casualties have been reported in the incident.
The fire in Lajpat Rai market, which is located opposite to the Red Fort, started around 4.45 am.
Visuals from the spot showed tall flames swallowing shops as fire fighters and local residents try to control the blaze.
Later, photographs tweeted by news agency ANI showed charred shops and products burnt to ash.
There is no information yet on on what caused the fire.