Neighbours were evacuated from their flats in Fleet after a fire was started in a ground floor kitchen in the middle of the night.
Tenants and owners of the 10 flats in Kingswood Court were forced to flee the building at around 4.10am on Tuesday, feeling their way through the dark smoke billowing out of the open door of the flat.
The occupant of the flat which was alight, a 38-year-old man, was not in when firefighters arrived to tackle the flames and was arrested on suspicion of arson when he returned around an hour later.
He has now been detained under the Mental Health Act.
A police investigation is ongoing but a spokesman for Hampshire Fire and Rescue Service said they had concluded from initial assessments of the scene that it had been started deliberately.
Firefighters from Fleet and Rushmoor fire station entered the flat wearing breathing apparatus and isolated the fire within the kitchen before extinguishing it and blowing the thick smoke that had filled the property out of a rear window.
One neighbouring flat also suffered minor smoke damage.
The road outside the flats was closed for around two hours while firefighters and police officers made the area safe.
Residents, some in their pyjamas, gathered outside for around three hours and were supported by paramedics and given blankets and cups of tea by Red Cross volunteers.
Two occupants of the neighbouring flat, who asked not be named, raised the alarm after awaking to the sound of a smoke alarm.
Thinking their neighbour may still have been inside, they shouted and banged on the window before realising his car was not outside. They then woke up the other residents to get them outside to safety.
One said: “It was a scary experience seeing so much smoke in such an enclosed space.
“It was a relief to see everyone get out safely and for the fire to be put out. Thank you to the fire brigade for their speedy arrival and all the other volunteers who were very reassuring.”