Four appliances from Newport, Ryde, Sandown and Yarmouth are in attendance at the scene off Beachfield Road in the town, where flames are shooting into the sky with billowing smoke that can be seen for miles around.
Firefighters are struggling to bring the blaze under control, which has destroyed the roof of the hotel and gutted several floors.
The Isle of Wight Fire and Rescue Service were called to the incident at around 23:40, however local residents have told Island Echo that they could smell something in the air up to an hour before the 999 call was made.
One local said they walked past the hotel just 10 minutes before the emergency services were called but didn’t see any signs of fire.
It is currently unclear how the fire at the derelict property started.
Cordons are in place surrounding the scene for public safety, however all roads remain open.
UPDATE @ 01:40 – The fire, which has destroyed the majority of the building, has been brought under control however has not yet been fully extinguished.
A water bowser from Ventnor is in attendance at the incident providing additional water supplies.
Meanwhile, paramedics from the Isle of Wight Ambulance Service are standing by at the scene, however no persons have been injured.
One pumping appliance from Ryde has left the scene, however crews continue to bring areas of the property under control.
UPDATE SUNDAY @ 09:00 – An investigation is this morning underway to determine the cause of the fire, which has left the former hotel as nothing more than a shell.
In total around 25 firefighters tackled the blaze overnight with some crews still on scene this morning tackling the remaining hotspots.
This video, captured by Island Echo reader Jen Cook, shows the moment part of the roofing collapsed as locals watched on.
Planning permission to demolish the Royal Cliff Hotel and transform the land into a three/four storey block of 26 apartments with underground parking was submitted back in September 2013 following several failed planning applications.
Nearly three years ago the derelict Savoy hotel, also in Sandown, was gutted when a fire ripped through the entire building.
UPDATE @ 12:22 – It is understood that the large-scale blaze is being treated by Police as suspected arson.
A joint investigation involving the Isle of Wight Fire and Rescue Service and Hampshire Constabulary is underway looking into the full circumstances behind the fire.
This exclusive video, captured by reader Jamie McMahon, shows the fire at its peak with flames reported to be visible from Brading, Lake and further afield.
Reader John Morley captured this video showing the size of the blaze from the end of Sandown Pier.