Crews knocked down the front walls as demolition of the Hotel Do De building neared completion Tuesday.
The landmark Bellefonte structure was severely damaged in a September 2012 fire.
The High Street blaze also damaged the Garman Theatre next door, which is likewise slated for demolition in the coming days.
The structures will give way to a workforce housing project by State College developer Ara Kervandjian.
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A crowd of about 30 gathered Monday evening on the steps of the Centre County Courthouse for a vigil in anticipation of the Garman coming down.
Members of the Bellefonte Historical and Cultural Association fought the Garman demolition plan in the courts, but a recent ruling cleared the way for the structure to be razed.
There were no injuries in the Sept. 9, 2012, fire, but 21 residents of the Hotel Do De were displaced.
Demolition work began Thursday, with crews working through the Do De from the alley in the rear of the structure.