Three firefighters suffered minor injuries, fire officials said. No other injuries were reported.
The fire destroyed an area called New York street, which includes movie-set buildings designed to look like the New York cityscape.
Hours after the blaze started, the area looked charred and resembled a "disaster movie," said Los Angeles Councilman Tom LaBonge.
Watch choppers try to douse the fire »
LaBonge said he could see the smoke from his home Sunday morning.
"I looked out my window at the Hollywood Hills, and it looked like a bomb had exploded," he said.
Despite the massive blaze at the Southern California site, which includes an amusement park, officials still planned to hold the 2008 MTV Movie Awards there later Sunday.
The awards show was scheduled to be broadcast live from an amphitheater at the park Sunday afternoon, an MTV representative said.
"The areas we are utilizing for our production were unaffected, and the 2008 MTV Movie Awards will go on as planned," an MTV spokesman said in a statement. "We're working closely with authorities to make sure everything operates smoothly."

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