Two staff were taken to hospital for check-ups after tackling the blaze in an oven at the Barton Grange Hotel near Preston.
Scores of guests and diners - some on organised Christmas celebrations - had to be led out of the building in Garstang Road, Barton and into the car park as a precauition.
The fire began around 7.30pm as kitchen staff were preparing to serve dinner.
A fire brigade spokesman said: “It was in the main kitchen of the hotel where one of the big commercial ovens had set onn fire.
“It caused a bit of a panic and filled the kitchen with smoke. Two of the kitchen staff tackled it with dry powder extinguishers and it was out when we arrived.
“We just inspected the premises to make sure evertything was safe.
“The hotel had to evacuate the staff and guests and there were one or two Christmas parties going on at the time, so it was quite busy.
“The two staff that tackled the fire were treated with oxygen at the scene annd were then taken off to hospital to be checked out.
“It looked like they were suffering from a bit of smoke inhalation, but they had also inhaled some of the dry powder from the extinguishers. I gather it isn’t dangerous, although it can get on your chest.
“When we left there were quite a lot of people still out on the car park. I don’t know if they got fed in the end.”