No casualties were reported in the incident, they said.
Several vehicles were stranded behind the burning car, causing panic on the road stretch for some time.
The incident was reported in the southbound tunnel carrying traffic from Haji Ali towards Worli at 12.25 pm, a civic official said.
The blaze erupted in a moving car, following which personnel from the Mumbai fire brigade, police and the 108 ambulance service rushed to the spot.
The fire was brought under control and extinguished at around 12.45 pm, he said.
The cause of the fire was not known immediately, the officials said, adding that the movement of vehicles through the tunnel resumed after the blaze was doused.
An eyewitness described the incident as one of the most frightening experiences.
"Within seconds, traffic came to a standstill and people started abandoning their cars and running. There were screams, panic and complete chaos. It felt like a scene straight out of a Hollywood disaster movie," said Viren Shah, president of the Federation of Retail Traders Welfare Association (FRTWA) said, who was driving through the tunnel when the fire broke out.
He said there was complete chaos inside the tunnel at the time and he got out of it from Worli after taking a lift from a motorist before hiring a taxi to reach south Mumbai.
Shah urged the Maharashtra government to strengthen emergency preparedness inside the tunnel by improving evacuation signage, public awareness and safety protocols, saying the incident underscored the need for motorists to know how to respond during emergencies.
