A water tank in the top-floor flat of the four-storey historic building in Canongate overflowed for hours, eventually leaving Ottavios, the only ice-cream shop in the Royal Mile, under more than a foot of water.
It has left the shop's interior completely destroyed, with owner Mr Di Sotto unsure if the family-run business will be able to open for the summer.
Mr Di Sotto, who has run the business for eight years, discovered the nightmare scenario as he walked to his other shop, the nearby Fudge House.
Well into yesterday afternoon, the water continued to filter down through the three unoccupied flats and into the shop, to the fascination of tourists and local workers.
It poured from the windows of the home above, and through light fittings in the shop itself.
"I just felt sick, I could have burst into tears," said Mr Di Sotto, 66, who has been involved in the fudge shop since 1977.
"I don't know exactly the extent of the damage, but it looks bad, everyone can see that. The ceiling will be ruined, and we've got all kinds of equipment in there too."
The one consolation the family can take is that the shop does not open over winter months, meaning no immediate trade is lost and most machinery was switched off.
They have lost a preparation facility for the fudge shop, however, but Mr Di Sotto's son Paolo said: "We are lucky it wasn't the fudge shop - because that's the main line of our business."
It is understood a burst pipe caused water to flow back out the top-floor tank and into the buildings below.
No-one lives in any of the properties, meaning the leak could have gone unnoticed for days before gathering speed.
Council workers arrived on the scene around midday yesterday.
"Hopefully our insurance will cover this, but it can't protect everything," added Mr Di Sotto Snr.
"This is what can happen when you have a shop under flats. If no-one lives there, you have no protection.
"It's always the tank in these cases and always seems to happen when you're not there.
"I don't even know why old flats have these old tanks now - when we had a leak there a few years ago that was because of an overflowing tank.
"There should be some system that stops this from happening because you can see what they can cause.
"It's important we can open in time for the summer season.
"We're the only ice-cream shop on the Royal Mile, and one of hardly any left in Edinburgh.
"I suppose worse things can happen to you - people are having problems like this all over the country."