The Phoenix Theatre in Lewes was completely destroyed by fire on Saturday evening.
About 40 firefighters from stations across East Sussex fought to save the North Street building, which served as a theatre and community arts space.
They managed to stop the blaze spreading to adjacent buildings and nobody was injured in the drama.
Eyewitnesses said they were astonished at how quickly the flames took hold.
The alarm was raised at shortly after 6pm. The cause of the blaze has not yet been established.
The building, measuring some 50m by 30m, was due to host an 18th birthday party for more than 150 guests that evening.
About 10 people were in the building when the fire started.
Three members of local band Scott Free had been setting up their equipment prior to the party. It was all destroyed as the occupants ran for their lives.
Drummer Hugo Bowman, 17, said: “I suddenly felt heat and looked up at the ceiling. It was covered in black smoke and flames.
It was terrifying because it all happened so quickly. We were lucky.”
He added: “If it had happened later in the evening with more people inside there would have been deaths, no doubt about it.”
East Sussex Fire and Rescue Service said the cause of the devastating blaze was believed to be accidental.
Firefighters attended from Lewes, Newhaven, Uckfield, Hailsham and Hove.
Crews also employed the aerial ladder platform from Brighton.