Crews were called to The Ship Inn, Highley near Bridgnorth on Thursday to contain the blaze.
And residents say the pub and restaurant, located on the banks of the River Severn, is the 'hub' of the area.
Visitors come from various parts of the country to dine while they are staying in nearby holiday homes and fishing on the river.
The fire broke out shortly after 5am, and three fire crews arrived at the scene within 10 minutes to tackle the flames.
The blaze has left the outside decking severely damaged, with part of it completely collapsing. But the damage to the inside is mainly due to smoke.
A gas cylinder also exploded during the blaze, but this was not the initial cause of the fire.
Nobody was injured during the incident.
A witness said that without the crews reacting so promptly, it is likely the blaze would have engulfed the whole building.
Richard Taberner, who lives nearby, said the pub is the backbone of the area, and they are devastated for the owner who has worked so hard to make it into a successful business.
He said: "She has turned the place into an amazing pub since she took it on. It is so sad for her.
"The place is really good for the community because people come to the area for the fishing and the pub.
"This is just horrible.
"You only get people saying good things about it, and she is such a nice lady.
Mr Taberner, who runs a holiday letting company with his partner, believes the fire could have a knock-on effect on their business.
He added: "We do holiday lets, and it will have a big effect on us, as well as people getting off the railway looking to go for somewhere to eat.
"The pub has a big pulling factor. It is because it has good food, and you are always made to feel welcome."
Nobody was injured during the blaze but employees have been left devastated by what has happened to their workplace.
One said: "This is our place of work. We are gutted this has happened.
"It’s the hub of the village. It’s such a shame."
Crews extinguished the fire using four breathing apparatus, two hose reel jets and one main jet.