Fire crews were called to L & M Spray in Gladstone Street at 10:20 BST.
Leicestershire Police closed the street alongside Crafton Street, Humberstone Road, Clyde Street, Wharf Street South and St Matthews Way due to smoke billowing across the city.
St Matthews Way has been reopened but two fire engines remain at the scene.
A Leicestershire Fire and Rescue spokesman said the cause of the fire is unknown at the moment.
He added an inspector has deemed the factory building "unsafe" and that it may have to be demolished.
Witnesses have told the BBC the road closures have caused chaos for buses and vehicles travelling around the city.
The BBC has attempted to contact L & M Spray but has not received a response.

The 10 letters were penned between 1951 and 1960 to her mentor and lifelong friend Sir Felix Aylmer.
They reveal details of a dramatic decade of the screen siren's life as she rose from an unknown ballerina to Hollywood fame.
In them she mentions her broken-off engagement, marriage, miscarriages and the birth of her first child.
The letters are estimated to sell for up to Â£4,000.
In one of the letters, dated 1951, a then 22-year-old Hepburn, wrote: "Would you believe it. I'm in Monte Carlo working on a French picture. The place is heavenly and this is the best thing that's ever happened to me."
The actress was referring to filming Monte Carlo Baby, one of her very first movies.
A year later she wrote that "with a heavy heart" she had broken off her engagement to socialite James Hanson.
"It is all very unhappy-making," she said. "I fear I thought it possible to make our combined lives and careers work out."
This was followed by joy at finding her future husband, actor Mel Ferrer, whom she married in private in 1954.
"We want to keep [the wedding] a dark secret in order to have it without the 'press'," she confided a few weeks before the ceremony, which was to be held "in a tiny chapel with a wedding breakfast after".
Hepburn and Ferrer went on to become co-stars in films such as Sabrina (1954) and War and Peace (1956) after they were married.
Following two miscarriages the final letter in the collection ends on a celebratory note as the actress celebrated the birth of her first child, Sean Ferrer.
"Sean is truly a dream. I find it hard to believe he is really ours to keep. I long to show him to you. We all three send our love and kisses, Audrey," she wrote.
The letters will go on sale at the Bonhams Entertainment Memorabilia sale in London on 29 June.
A large fire at a spray paint factory has closed a number of roads in Leicester city centre.
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A series of never-before-seen letters written by Audrey Hepburn will be auctioned later this month.