Despite attempts by authorities to downplay the incident reports said Russia's navy chief flew out to the scene and an official said the vessel may need to be submerged in water to put out the blaze.
A statement by the press service of the Zvyozdochka shipyard said that the fire started at 2:00 pm (local time) in the stern of the submarine, when welding works impacted rubber-based hull insulation.
Ilya Zhitomirsky, spokesman for the United Shipbuilding Corporation which manages the facility, said the vessel -- a cruise missile type sub called Orel with two reactors that is classified as Oscar-II by NATO -- had nuclear material aboard.
"The nuclear fuel had been unloaded from Orel before it was put up on dry dock. The reactor is turned off," he told RIA Novosti agency.
He said however that preparations were under way to submerge the sub as attempts to extinguish the fire with other means have apparently failed.
Televised footage from the dock showed black smoke rising above the giant 155 metre-long (508 feet) submarine.
A representative of the Severodvinsk fire service however told AFP that "you can't smell the smoke in the city" and that municipal firefighters were not being called in to help the shipyard's own fire department.
The website of the Zvyozdochka (Star) shipyard said the Orel has been under repair since November 2013 and that the work would take two years.
In a sign that the fire may be more serious than the officials initially let on, a source in the General Staff further told Interfax that navy commander Viktor Chirkov, has departed for Severodvinsk, while commander of the Northern Fleet, Vladimir Korolyov, was already at the scene.
Severodvinsk is located in Russia's northern Arkhangelsk region, on the White Sea.
