An underground electricity fault at the bottom of a post feeding the overhead power line had sparked a blaze.
Fire crews were called to the tracks on North Promenade, close to Cocker Street, after the sparks were seen coming from the bottom of the post at 11.30am yesterday.
Blackpool Transport bosses were forced to stop trams running in both directions between Manchester Square and Red Bank Road for 90 minutes while United Utilities engineers shut down two substations to pinpoint the fault.
Buses were put on to ferry tram passengers between the two points.
A spokesman for the fire service said: "There was no fire as such. The smoking and flames were caused by the electricity cables touching and arcing in the ground.
"The electricity supply needed to be shut down in order for the engineers to repair the fault.
"Once the fault was corrected we then sprayed powder on the area as a precaution."
A spokesman for Blackpool Transport said: "The problem was an electrical fault underground. At no time were the public in any danger.
"Trams could not travel between Manchester Square and Bispham in both directions so buses were put on until the service was back in full operation at 12.45pm."