Dubai officials said reports suggest the blaze started outside the 20th floor of the building, but they maintain the fire has not spread inside the structure. Four squads of firefighters responded and were working to stop the fire's spread.
About 15 minutes before midnight local time, large explosions could be heard from inside the burning building. It was not clear what caused the blasts.
Officials said the fire was 90 percent contained. But shortly before midnight, flames still laced the side of the building as smoke billowed around it.
The building sits near the Burj Khalifa, the world's tallest skyscraper at 828 meters (2,716 feet).
U.S. officials do not yet know what caused the blaze, though they have been cautious about potential threats to celebrations, a senior counterterrorism official told NBC News.
The fire broke out about two hours before midnight local time, when the fireworks display was set to begin. The display ended up starting shortly after midnight.
Tens of thousands of people whistled and cheered at the show taking place at the Burj Khalifa. Organizers had installed 400,000 LED lights on the Burj Khalifa and used some 1.6 tons of fireworks for the seven-minute extravaganza.
From there, the fireworks were to light up the sky around the sail-shaped Burj Al Arab and later down near the Dubai Marina. Fireworks also will be on display in Abu Dhabi, the capital of the country of seven emirates.
Nearly an hour after the fire began, some onlookers began to leave while others stood, pressed against crowd barricades, watching the blaze. Among them was Chris Browne, a tourist from London, who watched the blaze with her husband, Stephen, standing behind her. They said they hoped no one was injured.
"It's pretty scary stuff," she said.
Standing nearby, Stuart O'Donnell, a British intensive care nurse who works in Dubai, said he was worried for those inside the building.
"You feel sad for the people inside. ... It spread so quickly when it started," he said.
He and others in the crowd wondered what had started the blaze. "I do feel suspicious of when a fire breaks out on New Year's Eve," he said.