The fire started around 7 p.m. at the Vista Hotel and Conference Center on Grand Avenue just west of the Tri-State Tollway.
Police had to shut down a mile-long stretch of Grand Avenue because of the fire.
A restaurant and banquet area are a loss, but firefighters managed to save the building containing the guest rooms.
The hotel was formerly a Holiday Inn. It's undergoing renovations; no guests were inside when the fire started.
"They did a really good job stopping it," Gurnee Battalion Chief Bob Heraver said. "All the areas where the rooms are were saved, there's just a little water and smoke damage."
The blaze was raised to a five-alarm fire before more than 100 firefighters from multiple suburban fire departments were able to extinguish it, Heraver said.
The fire sent white and then black smoke billowing in the air between Gurnee Mills and Six Flags Great America as it burned Tuesday evening. Gurnee police closed Cemetery Road between Grand and Lakeside Drive, and also Grand from Dilleys Road to Hunt Club Road while crews worked.
The building operated as a Holiday Inn for decades and was touted in a 2001 Lake County News-Sun story as the oldest hotel in Gurnee. It began operating as the Vista Hotel and Conference Center over the past two years.
Mayor Kristina Kovarik reported in April that the building was under "massive remodeling" and was scheduled to reopen as a Holiday Inn under new owners later this year.
Gurnee firefighters remained at the blaze overnight putting out hot spots.
Investigators were at the scene Tuesday and will return Wednesday to determine what caused the fire, Heraver said. No apparent cause was known as of early Wednesday.
The Sun-Times Media Wire contributed to this report.