More than 20 Chapel Hill firefighters and several fire trucks were dispatched to the fire at 204 W. Cameron St. at 7:14 a.m., said Chapel Hill Fire Marshal Caprice Mellon.
Mellon said it took about two hours for the firefighters to extinguish the fire, the cause of which has yet to be determined pending further investigation.
No one was injured because the house was closed in preparation for a new sprinkler installation.
"They are bringing the building up to code, but they haven't even started with the renovations," said Jay Anhorn, director of Greek affairs.
A town ordinance requiring all Greek houses to have sprinkler systems by August 2001 prompted the renovations.
The Chapel Hill Town Council passed the ordinance after a 1996 fire at the Phi Gamma Delta Fraternity house -- which is located just feet from the Kappa Sigma House -- killed five people.
Mellon said Wednesday's fire started in the basement of the house, which is located in Little Fraternity Court. She said some flames traveled up the stairwell to the first floor, but most of the damage was confined to the basement.
The walls of the basement stairwell were black Wednesday afternoon, and there was a pile of charred wood at the top of the stairs.
"There was pretty heavy smoke coming out of the upper floors," Mellon said.