Around 30 residents of an apartment block in the Bogside spent the early hours on the street when an arson attack forced a mass evacuation.
Firefighters said the residents of Sackville Court had "a lucky escape" after a blaze was started in rubbish bins at the base of staircases inside the building.
Eight firefighters wearing breathing apparatus, guided men, women and children through the heavily smoke logged building to safety. Three appliances and a turntable were tasked to the scene.
Residents first contacted city centre firefighters at around 5.30am today after alarms began to go off in the building.
Firefighters found the fire quickly and extinguished it before creating an air flow by opening fire doors and windows throughout the building to clear the smoke.
"Potentially this was an extremely dangerous arson attack," said Watch Commander Brian Hassan. "Sackville Court is a three storey building and the bins are inside the complex which filled with smoke quickly.
"There was certainly potential for loss of life and there was a delay between alarms and people actually responding to them.
"We would like to take this opportunity to remind people that if they hear a fire alarm they must evacuate immediately."
Residents were allowed to return to their homes just before 7am.