Emergency services were called to Cullen Street in Nimbin, a town famous for its drug history and alternative culture, just after 3am.
Five buildings were destroyed, Rural Fire & Rescue (RFS) spokesman Ben Shepherd told AAP.
Nine fire trucks, police and ambulance attended the blaze in the town, which is just north of Lismore.
There were no injuries.
Museum manager Michael Balderstone says the loss of the buildings will have a huge impact on the town, which has a population of about 350.
"It's really right in the middle of town, the Rainbow's probably the heart," he told ABC Local Radio on Wednesday.
"The museum's the biggest tourist attraction. It's a bloody mess."
The fire has been extinguished and police will start investigations, said Mr Shepherd.
One local tweeted "So much of Nimbin in gone forever".
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