No one knows how the fire started on that fateful September morning, and despite an official enquiry no explanation was ever delivered. One theory blamed the wealthy residents of Macquarie Street, disgruntled at losing their harbour views. Another was that it was burnt to destroy records stored in the basement of the building that contained embarrassing details about the convict heritage of many distinguished families.

Margaret Lyon, daughter of the Garden Palace decorator John Lyon, wrote in her diary

 ... a gentleman who says a boy told him when he was putting out the domain lights, that he saw a man jump out of the window and immediately after observed smoke, they are advertising for the boy ...

Margaret Stowe, nee Lyon diary, (MLMSS 1381/Box 1/Item 2)

Neither the boy nor the man were identified.

There are many eye witness accounts of the fire that day. From nightwatchman Mr F. Kirchen and his replacement Mr J. McKnight, to an emotional description by fourteen year old student Ethel Pockley. Although there were conflicting accounts as to where the fire may have started, is  seems likely that the fire started in the basement with flames rising around the statue of Queen Victoria, situated directly under the dome.

The coroner did not make a conclusive finding on the cause of the fire, however the fact that there were workmen working under the floor of the basement in the building the day before the fire started, suggests a possibility that the fire was caused by the work being undertaken by the men.