The Torn Hotel, in Rostov-on-Don, southern Russia, went up in smoke on Wednesday, with flames engulfing the 10-storey building and spreading to four cars parked nearby.
Russia’s Ministry for Emergency Situations said 50 firefighters and 19 fire engines were sent to tackle the 800sqm blaze.
Stunned onlookers reported seeing young children jumping from windows and being caught by men on the ground.
One witness told RIA Novosti: “Five children, girls, jumped from the second floor.
“Some guys were catching them.”
The newspaper reported that more than 400 people, including 61 children, had been rescued from the hotel.
A further 100 residents living nearby had been evacuated from their homes as a precaution, TASS reported.
The fire broke out at about 1.50pm Moscow time (11.50am BST) on Thursday, September 21.
The fire had been brought under control by 3.15pm (1.15pm BST).
A spokesman for the Ministry for Emergency Situations told TASS that the bodies of two hotel employees, a man and a woman, had been recovered.
He said: “A corpse of a man was found in the fire zone in the hotel room.
“One of the deceased is a man of 30. The second is a woman, both are employees of the hotel.”
Last month, an entire district of Rostov was virtually wiped out when an enormous fire destroyed 123 residential buildings and killing one man.
Locals told Radio Free Europe they believed the fire was started deliberately, possibly by underground criminals looking to buy the land for cheap to build a lucrative new residential area.