Residents were forced out on to the street and roads were blocked off when a fire tore through a flat in a three-storey house.
The house and two neighbouring properties were evacuated as the blaze gutted the flat on the top floor of a mid-terrace in Kimberley Road, Evington, on Monday night.
Four firefighters wearing breathing apparatus searched the blazing building but everyone in the property had managed to get out.
Police sealed off Kimberley Road, Beckingham Road, Herschell Street and Mayfield Road to enable fire crews to work uninterrupted.
Yesterday, police and fire services were investigating the cause of the blaze.
A 27-year-old man has been arrested in connection with the incident.
Student Joely Senior, who lives next door to the house where the flat was on fire, said the incident had left her shaken.
The 20-year-old, who is studying English and film studies at the University of Leicester, said: "We were watching television in the lounge when we saw the blue flashing lights.
"We went outside to see what was going on and could see thick black smoke coming out of the window of the flat on the top floor.
"It was all very exciting but then the firefighters went up a ladder and smashed the windows in the flat.
"We realised then it was serious and could have consequences for us."
Housemate Rebecca Mason, 20, who is studying psychology at the University of Leicester, said: "There was a loud knock at the door and it was the firefighters telling us to get outside and across the street, a safe distance away.
"It was quite scary and I suppose the fire could have spread to our house."
The six people in their house were joined on the street by the six male students from the house which is next door on the other side of the burning flat. A fire service spokesman said crews from Central and Eastern station were called to the blaze at 9.03pm.
They were joined by a crew from Wigston and the aerial ladder platform from Central station.
The firefighters had put out the blaze by 10.30pm.
The residents were allowed back into the homes shortly after.
She said the flat had been completely destroyed by the blaze and the flat below damaged by water.
Fire investigation officers and police forensic officers were at the house yesterday carrying out tests to try to discover the cause of the blaze.
A police spokeswoman said: "A 27-year-old man has been arrested in connection with the incident and remains in police custody."
