French security sources said some of the rioters had been carrying loaded guns when police arrested them.
The hotel fire, apparently caused by petrol bombs, spread through the ground floor of the building, which had been vacated because of the summit, and then took hold up to the roof. Fire also gutted a nearby tourist information office and a disused French customs post.
It was not immediately known if there were any casualties.
One French police officer claimed the hotel was attacked in the belief that it was being used to accommodate out-of-town police.
"It's no coincidence," he said bitterly. Police spokesmen declined to say if officers had been staying in the 78-room hotel.
Hundreds of police protected French fire fighters as they fought the blaze. French riot police, armed with clubs and shields, repeatedly fired tear-gas grenades to drive off rioters.
NATO leaders were meeting in Strasbourg on Saturday at a summit celebrating the 60th anniversary of the alliance's founding.
Some 10,000 police officers were deployed in and around the city, whose downtown districts were otherwise as deserted as a ghost town.
Police said 28 people were arrested early Saturday as nearly 2,000 demonstrators managed to infiltrate the city, blocking tramway and bus routes. But they failed in their primary goal of blocking the motorcades carrying NATO leaders.
The demonstrators' motto was a call to spend "millions on peace instead of billions on war."
The second day of the summit began with a formal ceremony on a bridge across the Rhine River which connects the German town of Kehl with Strasbourg in France.
German Chancellor Angela Merkel and French President Nicolas Sarkozy joined the heads of state and government from the other 26 NATO countries in a symbolic meeting on the occasion of France's rejoining the alliance.
After the ceremony, NATO leaders began talks on how to defeat the Taliban insurgency and prevent it from becoming a haven for al Qaeda terrorists.
"Afghanistan is a litmus test for us all," said German Chancellor Angela Merkel, one of the NATO summit's co-hosts along with French President Nicolas Sarkozy.
Merkel praised US President Barack Obama over his new strategy for Afghanistan and said her country was ready to contribute more soldiers, trainers and money towards "the Afghanistanization" of the country.
Sarkozy also lauded Obama's new approach to the conflict, which involves speeding up Afghan reconstruction and involving other regional players such as Pakistan and Iran.
Obama and NATO Secretary General Jaap de Hoop Scheffer then formally welcomed Albania and Croatia into the alliance, with the US president offering leaders of the two countries a copy of NATO's 1949 founding treaty.