Flames six metres high were fuelled by strong gusts of wind as the fire spread from protected parkland in the centre of Ibiza Town threatening to engulf residential areas.
The fire broke out for reasons as yet unknown shortly before 1pm on Monday. The area where the fire raged is a protected wetland home to an estimated 140 species of bird.
It also served as an area popular with the homeless who slept out in makeshift shelters in the reeds and canes, according to El Mundo.
At least five cars were destroyed in the blaze and two homes had to be evacuated while firefighters battled to bring the fire under control.
Authorities said the fire was a "level 2" and that there were no reported casualties.
Parts of the ring road around Ibiza town and the road to Santa Eulalia were blocked as the fire raged.
A water-dropping helicopter was sent to tackle the blaze from neighbouring Mallorca.
Eye-witnesses shared images of the fire on social media.
Terrible incendió en estos momentos en Ibiza. pic.twitter.com/Yn1BGSXLns— Sofía Hernanz Costa (@Hernanzsofia) March 6, 2017