The Cocoanut Grove had been trouble since its founding in 1927 during Prohibition. Orchestra leaders Mickey Alpert and Jacques Renard opened it as a legitimate venue, but their Mafia-connected financiers quickly took control, turning it into a speakeasy with a reputation as a gangland hangout. Bootlegger Charles "King" Solomon, known as "Boston Charlie," owned the club from 1931 until he was gunned down in the men's room of a Roxbury nightclub in 1933. By 1942, the club belonged to Barnet "Barney" Welansky, a man closely connected to both the Mafia and Mayor Maurice J. Tobin. The building itself was a converted garage and warehouse complex, a meandering maze of dining rooms, bars, and lounges decorated with flammable artificial palm trees and fabric-covered false ceilings. Exit doors had been locked to prevent unauthorized entry. The air conditioning's Freon refrigerant had been quietly replaced with flammable methyl chloride because of wartime shortages. A fire inspector had declared the club safe just ten days before the disaster.

Around 10:15 pm, in the basement Melody Lounge, busboy Stanley Tomaszewski was ordered to screw a lightbulb back in after a patron had loosened it for privacy. Unable to see in the dark corner, he lit a match. Moments later, witnesses saw flames in the artificial palm fronds just below the ceiling. Waiters tried to douse the fire with water, then pulled the burning decoration away from the wall, inadvertently opening the space above the false ceiling. The fire exploded. Flames raced up the stairway to the main level and burst through the front entryway as a fireball, tearing through the Caricature Bar, the Broadway Lounge, and across the central dance floor where the orchestra was just beginning its evening show. Within five minutes, the entire nightclub was engulfed. Some patrons were overcome by smoke as they sat in their seats. Others crawled through blackness searching for exits that were locked, hidden, or nonfunctional. On the frozen street outside, firefighters pulled out smoldering bodies, living and dead. Newspaper trucks served as makeshift ambulances. Hoses froze to the cobblestones.

Staff who knew the service areas fared better than patrons trapped in the public spaces. Bandleader Mickey Alpert escaped through a basement window, leading several people to safety. Five people survived by hiding in a walk-in refrigerator. Bassist Jack Lesberg escaped backstage and went on to play with Louis Armstrong, Sarah Vaughan, and Leonard Bernstein until shortly before his death in 2005. The most extraordinary survivor was Coast Guardsman Clifford Johnson, who went back into the burning building four times searching for his date, who had already escaped without his knowledge. Johnson suffered third-degree burns over 55 percent of his body, becoming the most severely burned person to survive such injuries at that time. After 21 months in the hospital and hundreds of operations, he married his nurse and returned to Missouri. Fourteen years later, in a cruel twist of fate, he burned to death in an automobile accident. The official cause of ignition was never determined. The fire investigator's report listed it as "unknown origin," though later analysis suggested methyl chloride from the air conditioning may have been ignited by faulty wiring behind the palm decoration.

The disaster transformed American public safety. Barney Welansky was convicted on 19 counts of manslaughter and sentenced to 12 to 15 years in prison, though he served less than four. Pardoned by Tobin, who had since become governor, Welansky was released in December 1946, ill with cancer. He told reporters, "I wish I'd died with the others in the fire." He died nine weeks later. New laws swept the nation: flammable decorations were banned in public establishments, emergency exits were required to remain unlocked from the inside, and revolving doors could no longer serve as sole exits. But the fire's legacy extended far beyond building codes. Boston's hospitals, which had been rehearsing emergency drills in preparation for possible wartime attacks on the East Coast, mounted an extraordinary medical response. Massachusetts General Hospital had established one of the area's first blood banks just months earlier, and 147 units of plasma were used treating burn victims there. Thirteen survivors became among the first humans treated with penicillin, and the drug's success in preventing graft infections convinced the U.S. government to fund mass production of penicillin for the armed forces.

The Cocoanut Grove was demolished in 1944. The street map of Bay Village changed through urban renewal, and for decades the site at 17 Piedmont Street served as a parking lot. Much of the club's former footprint now lies beneath the Revere Hotel. In 1993, the Bay Village Neighborhood Association installed a memorial plaque in the sidewalk, crafted by Anthony P. Marra, who had been the youngest survivor of the fire. The inscription reads: "Phoenix out of the Ashes." The nearby section of Shawmut Street was renamed Cocoanut Grove Lane in 2013. Psychiatrist Alexandra Adler spent 11 months studying more than 500 survivors, publishing some of the earliest research on what would later be recognized as post-traumatic stress disorder. She found that over half exhibited lasting symptoms of anxiety and nervousness. At Massachusetts General Hospital, surgeon Bradford Cannon pioneered a new burn treatment technique using petroleum jelly and boric acid ointment that dramatically improved survival rates. The last known survivor of the fire, Robert L. Shumway, died on June 25, 2025, at the age of 101. In 2023, groundbreaking was held in Statler Park for a permanent memorial featuring three arches echoing the nightclub's original entrance and 490 granite bricks, each inscribed with a victim's name.