The ship had its lifeboats out but they were not lowered
See the ship
Crew members brought the fire under control, later assisted by East Sussex firefighters as part of a new national offshore fire and rescue service.
The Calypso was about 20 miles south-west of Beachy Head at the time.
Although passengers and crew boarded lifeboats, no evacuation was carried out and there were no casualties.
The Maritime and Coastguard Agency (MCA) received a Mayday call at about 0400 BST from the Calypso.
East Sussex Fire and Rescue Service firefighters were helicoptered to the ship, in the first incident dealt with by the Maritime Incident Response Group (MIRG) launched last month.
I thought, we have to get into the water as soon as possible
Passenger Wim Snoek
Lifeboats from England and France, and several merchant ships, also attended following the Mayday call.
An East Sussex fire service spokeswoman said 18 firefighters stayed on board to cool the blaze area. The cause of the fire is not yet known.
A coastguard helicopter also flew to the ship a five-strong offshore paramedic response team, from Sussex Ambulance Service, to carry out medical assessments of those on board.
No injuries
A spokesman said there were no reported injuries, but the blaze could have worsened existing medical conditions or left people suffering shock.
Operator Louis Cruise Line UK said there were 454 Dutch passengers, one Briton, one US citizen, two Belgians, one Swede, two Swiss and one person from Belarus, on board the Cyprus-registered vessel.
One passenger, Wim Snoek, said it had been a tense few hours: "It was terrible for the children as well, especially because it was so dark and so much smoke that you couldn't see anything, because it was four o' clock when it happened.
"The lights went out and it was all dark and then we thought, well, this is the last 30 minutes.
"The only thing I thought, we have to get into the water as soon as possible."
The cruise ship had been sailing from Tilbury, Essex, to St Peter Port in Guernsey.
The MCA has set up its emergency response centre in Southampton, with arrangements for the vessel, crew and passengers being made from there.
Many of the passengers were staff and guests of Dutch travel firm, Cruise Travel, celebrating its 20th anniversary.
Cruise Travel spokeswoman Corry Broere said: "My family is on board and they phoned me, and of course they had been frightened, but when they called me everything was already very calm... the fire was not [burning] for a long time."
Dover Coastguard Rescue Co-ordination Centre manager Spike Hughes said: "Once the alarm has gone the routine for the crew and passengers is to muster on their evacuation points, which would be by the lifeboats.
"All the crew and passengers were actually in the lifeboats ready to be evacuated if necessary, but it didn't come to that fortunately."
The MIRG is the UK's first specialised fire and rescue service for incidents at sea and is one of the first of its kind in the world.
A cruise ship caught fire 32 km (20 miles) off the southeast coast of England. The blaze started in the engine-room of the Calypso, which had 708 passengers and crew onboard. 

The passengers were mainly Dutch.

Specialist firefighters transported by helicopter from the East Sussex Fire and Rescue Service tackled the fire.

It was tugged to Southampton by the Anglican Monarch, a tug boat jointly operated by England and France. The relieved passengers left to boat 16 hours after the fire started. 

"A team will be going onboard to assess the situation, so time will tell," said the Maritime and Coastguard Agency spokeswoman.

There were no causualties and no evacuation.