The fire broke out at Badabing Italian restaurant at Fountainbridge just after 2am yesterday.
Thirty firefighters fought to bring the blaze under control and managed to stop it spreading to neighbouring properties despite strong winds.
Marty Stevens, who lives in Viewforth, said he saw the fire as he stood on a bridge over the canal having a cigarette.
He said: “I looked up and thought it looked very bright over there, then I saw it was a fire. I went along to make sure no-one was needing help, but the place must have been shut already.
“I met a guy who said he had phoned the fire brigade. He said it wasn’t that bad when he’d phoned but within 15 minutes it was no more Badabing, front and back wiped out.
“I got there within 10 minutes of the guy phoning the fire brigade and it was just the bit at the back – but within 15 minutes it was total wipe-out.”
Mr Stevens said there were blue hoardings around part of the building and it looked as if that was where the fire had started.
“It seemed to have started at the back of the building, outside, and transferred inside. Whether the hoardings covered an opening and could have sucked the flames through, I don’t know.
“To wipe the place out in 15 minutes is quite something. But the fire was contained to the restaurant/bar. None of the other properties, the offices above or the buildings either side, seemed to have been affected.”
The fire service said seven fire engines had attended the blaze.
A spokeswoman said: “We were alerted at 2.10am to reports of a building fire in Edinburgh. Operations control mobilised a number of appliances and 30 firefighters were called to tackle the fire.”
The restaurant was empty at the time of the fire and there were no casualties. The cause of the fire is not yet known.
Police said they had been informed of the blaze but were not required at the scene.