Police have established a cordon to keep members of the public away from the flames. The Mall is closed in both directions between Trafalgar Square and Horse Guards Road because of the incident, according to reports.
Videos shared on social media show large amounts of smoke rising into the air over the capital.
There are currently no reports of any injuries in relation to the fire.
A spokesperson for the Metropolitan Police told MyLondon: “Police are assisting with road closures following reports of a fire at an address in Spring Gardens SW1.
“No reports of any injuries at this time.”
Officers added that the fire broke out at an address in Spring Gardens, which crosses the east end of The Mall between Trafalgar Square and Admiralty Arch.
London Fire Brigade (LFB) later tweeted that the fire was “in a pub in Trafalgar Square”.
A number of social media users identified this as The Admiralty pub.
@Daniel_Peel wrote: “I think this could be the Admiralty.
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The LFB reported: “Half of the basement is alight.
“Please avoid the area if possible as there will be heavy traffic disruption.”
Twenty fire engines were sent to the scene along with 125 firefighters to tackle the flames.
Around 150 people were evacuated before crews arrived.
Station Commander Keith McDermott said: “The fire is in the sub-basement of a pub in Trafalgar Square. Due to the arduous, challenging and hot conditions inside the basement we’ve increased the number of fire engines and firefighters at the scene.
“Around 150 people evacuated the pub and surrounding businesses before the Brigade arrived. There has been no reports of any injuries…
“The Brigade was called at 5.49pm. The cause of the fire is not known at this stage.”