The man and woman, believed to be in their late 50s and living above the Bakery Hill restaurant Zaragosa, were alerted by a working smoke alarm.

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VIDEO FOOTAGE BY JUSTIN WHITELOCK.

Emergency services were called to the incident  in Victoria Street about 10.10pm, with both Ballarat and Ballarat City crews responding to the fire.

CFA incident controller Mark Cartledge said once at the scene, crews rescued a woman trapped on a verandah above the neighbouring UFS pharmacy.  A male occupant who had tried to exit from a fire escape at the back of the property was also rescued.

The woman was treated for smoke inhalation at the scene by paramedics.

Seven CFA vehicles and 40 personnel attended the incident, with police diverting traffic around the scene.

Mr Cartledge said the extent of the damage was unknown.

He said a collapsed ceiling hindered crews from bringing the fire under control. 

It is believed the fire began on the ground floor at the back of the property and that the fire was contained to the one structure.

The restaurant was closed when the fire started.

Police sergeant Chris Taylor said the fire was not suspicious and that damage would be more than $100,000.

Mr Cartledge said the CFA would investigate the cause of the fire.

The fire attracted much attention from nearby residents who crowded onto the street to watch the CFA and police at work.

The Bakery Hill property is listed for sale by PRD Nationwide.

HOW BALLARAT REACTED TO THE FIRE ON SOCIAL MEDIA: