Firefighters were called to Wolverhampton College's campus on Paget Road at around 1pm on Wednesday.
Nobody was injured and students returned to class once the fire crews had cleared the scene.
Firefighters arrived within five minutes of the original call, using breathing apparatus and a hose reel to approach and safely extinguish the fire.
One student, who wished to remain anonymous, said a boy started the fire by accident.
"The news circulating City of Wolverhampton College is that a teenage student boy was playing with a lighter and some toilet roll in the loos and started the fire by accident. It was found by an ex-student who was visiting the college," they said.
Louise Fall, vice principal at the college, said: "There has been a small isolated fire in a second-floor toilet block at the Paget Road campus at 12.55pm today.
"The fire alarm was raised immediately and a full evacuation of the whole campus took place, safely and efficiently, with fire crews attending to assist. No other emergency services were called and there are no reported injuries.
"The cause was an accidental incident. Staff and students have been now been able to return to all areas of the campus and the campus remains open.”