A fire broke out in the hotel, killing 61 people, many of them children. The fire began in the Silver Grill Cocktail Lounge on the lower floor on the La Salle Street side adjacent to the lobby before ascending stairwells and shafts. The fire started either in the walls or in the ceiling according to the Chicago Fire Department around 12:15 a.m. but they didn’t receive their first notification of the fire until 12:35 a.m. The fire quickly spread through the highly-varnished wood paneling in the lounge and the mezzanine balcony overlooking the lobby. While a significant number died from flames, a greater number of deaths were caused by suffocation from the thick, black smoke. Around 900 guests were able to leave the building but some 150 had to be rescued by the fire services and by heroic members of the public, including two sailors who were reported to have rescued 27 people between them. Two-thirds of hotel fire deaths in 1946 occurred in the La Salle and Winecoff (Atlanta) fires. The hotel fire was so devastating, it resulted in the Chicago city council enacting new hotel building codes and fire-fighting procedures, including the installation of automatic alarm systems and instructions of fire safety inside the hotel rooms.
The hotel was refurbished after the fire and was finally demolished in July 1976, to be occupied by the Two North LaSalle office building. This s kyscraper was completed on the site in 1979.