Nantucket Fire Department captain Nate Barber said he noticed smoke billowing from the historic Veranda House Hotel building just before 7am while getting a coffee near by.
Mr Barber rushed to the scene along with several civilians to find the building engulfed in flames, and was told by a guest that his son was still inside, the Nantucket Current reported.
Speaking from his hospital bed where he was recovering from smoke inhalation and heat exhaustion, Mr Barber told the news outlet the smoke was too thick for him to enter, and so he climbed onto a roof and gained access through an open window.
Once inside, he heard a couple yelling for help through pitch black smoke in a hallway.
“I grabbed them, took them out the window to another side of the building and onto a roof,” Mr Barber told the Nantucket Current.
“Miraculously there was a guy there with a ladder, I think it was a neighbour, and we took the people down the ladder.”
Mr Barber then re-entered the building and kicked down doors to search for survivors throughout the three-floor hotel, by which time firefighters had arrived to help with the rescue effort.
All of the guests and staff made it out alive.
“The actions of the citizens and the Captain saved lives,” the Nantucket Fire Department said in a statement.
The fire continued to rage for more than an hour, destroying several buildings in downtown Nantucket.
“Damage to the structures involved is extensive with several of the buildings being total losses,” the department said.
Along with Mr Barber, two other firefighters were treated in hospital for injuries. No civilians were hurt.
Videos posted on social media showed smoke billowing into the sky above the downtown area.
Officials asked for people to avoid the area.
About 185 customers were without power because of the fire at about 8:45am, according to National Grid. All but seven had their power restored by 11am.
The inn, which was built in the late 1600s, boasts 18 rooms and suites, according to its website.