A huge blaze that ripped through the centre of an ancient Tibetan town in the popular Chinese tourist area of Shangri-La has destroyed almost 300 buildings, state-media said Sunday.

The fire in Gyalthang -- which is situated in an area believed to be the inspiration for James Hilton's mythical Shangri-La -- flattened two thirds of the town's old centre, the Beijing Morning Post reported.

The government-run Yunnan Net news service said 242 houses, mostly wooden, were burned down in the 1,300-year-old town while a further 43 were demolished to prevent the fire from spreading.

"The damage is extremely heavy," the Yunnan report said, citing local officials who added that a final estimate of the damage was still to be made.

The town, known in Chinese as Dukezong, has become a popular tourist destination thanks to Hilton's 1933 novel "The Lost Horizon" which describes a mystical lost paradise called Shangri-La.

In 2001, officials renamed the surrounding county -- which sits in southwest China's Yunnan province -- Shangri-La as part of efforts increase visitor numbers.

More than 1,000 firefighters and volunteers were deployed to tackle Saturday's blaze and photos posted on local news sites showed gigantic flames, some more than ten metres high.

There have been no reports of fatalities.

"A single fire destroyed goods I'd saved worth over 12 years worth 40 or 50 thousand yuan ($6600-$8300)," a local vendor surnamed Zhao told the state-run China news service.

"The blow to me is too large," the vendor added.

The fire in Gyalthang, which sits high on the Tibetan plateau, followed a blaze at another high-profile site of Tibetan culture -- the Buddhist Serthar institute located in the nearby province of Sichuan.

The inferno last week destroyed at least 10 structures at the institute thought to be among the largest in the world.

The cause of both fires is unknown and there have been no reports that either were started intentionally.