It said there were no casualties and no risk of radiation because the nuclear fuel had been removed during renovation.
It added there were no weapons on board La Perle (The Pearl), one of France's six nuclear attack submarines.
The fire broke out at about 10:30 am (0830 GMT) Friday in a hard-to-access part of the lower bow section of the submarine. It then took around 100 firefighters and 150 support people to put out the blaze by around midnight, the navy said.
The extent of the material damage was not immediately clear but an official with the Naval Group repair centre on Friday called the incident “serious.”
Defence Minister Florence Parly is to visit the site.
The submarine, which entered service in 1993, docked at Toulon in January for 18 months of renovation work that was to keep her operational until the end of the decade.
The vessel, which can dive to 300 metres (984 feet) with a crew of 70, is an attack submarine used for tracking ships, escorting aircraft carriers, carrying out coastal intelligence missions, and deploying special forces.
In addition to its six nuclear-powered attack submarines, France also operates four nuclear ballistic missile submarines.
The crew aboard the vessel were evacuated and there were no injuries, the navy statement said.
“There is no nuclear risk from the nuclear fuel, the latter having been removed as part of the framework of the technical stoppage,” it said. “There are no weapons (missiles, torpedoes, munitions) nor batteries on board”.
There were no reports of radiation but independent experts warned the French authorities to be vigilant for such a risk despite the absence of nuclear fuel or weapons on board the vessel in drydock.