The fire appears to have started in the building’s façade and police suspect that it was set intentionally.
The fire at the Imam Ali Islamic Center was first reported shortly after 11pm on Sunday night and national media showed images of large flames engulfing the building.
Police suspected arson within hours, with investigators saying that the damage to the outside of the building indicated that the fire had been intentionally set.
"It appears to have been set from outside,” Lars Byström, a press spokesman for the Stockholm Police, said.
Swedish intelligence agency Säpo has been informed of the fire, which is routinely done when a mosque is involved.
A mosque spokesman told that members were "very worried”.
"This is the largest Shia mosque in Sweden, with thousands of members, and there are already dozens of members here on the spot right now,” Akil Zahiri told in the early morning hours of Monday. "They are very worried. I feel terrified, stressed and sad.”
Zahiri said that there were a few people in the mosque when the fire was first noticed. A party had been held earlier in the evening.
The building suffered major damage and the area surrounding it was closed off. Police were expected to conduct a full technical investigation later on Monday.
The fire raged for over an hour but by 3am fire fighters had the flames largely extinguished.
No residential buildings surround the large mosque, so police said there was no risk of the fire spreading to other houses.