The 50,000-square-foot building at Washburn &: Doughty Associates was rocked by a series of explosions as flames ripped through the facility. The yard produced fishing boats, tugs, barges and ferries.
There were no reports of injuries and police indicated that all employees had apparently gotten out of the building safely.
The shipyardemploys about 100 workers and is a year-round economic linchpin in an area heavily reliant on summer tourism.
Fire crews and ambulances from a wide area converged on the scene in the village of East Boothbay. Specialists in hazardous materials were also called in.
The intense fire began around 9:30 a.m., and the explosions occurred about a half hour later.
Two tugboats were under construction in the building. Another vessel that was in the water was saved.
Smoke could be seen from the bridge linking Wiscasset and Edgecomb, about 10 miles away.