Three propane tanks were on fire, officials said, and the blaze has since been extinguished.
LIBERTY ISLAND, New York (WABC) --
The accident involved three 100 pound propane tanks where a new museum is being built.
The fire, which broke out shortly before noon, reached two alarms.
The evacuations led to long lines of tourists trying to board ferries.
Ferries carrying tourists to the island were halted until mid-afternoon.
FDNY Manhattan Borough Commander Roger Sakowich said the fire created a very dangerous situation.
"With that much propane a bleve, which would have been one of the tanks exploding, could have been catastrophic. Anybody near it, shrap metal would have been flying for quite some distance plus a tremendous ball of fire when a propane tank does explode like that, so we took the precaution to evacuate 3,400 civilians from the island," he said.
One construction worker was treated on scene for minor burns. No other injuries were reported.
FDNY says the flames were extinguished around 12:45 p.m., but crews continued to hose the propane tanks to cool them until the situation was declared under control around 1:30 p.m.
Investigators were still working to determine the exact cause of the fire.
Construction crews have been working on a new Statue of Liberty Museum, which is slated to be completed next year.