Xiushui Market, a major Beijing tourist attraction, closed last week after a forklift's bucket scooped down its red logo.
Xinhua News Agency reported thousands of people witnessed the demolition scene while dozens of cameras recorded the popular outdoor market's last moment.
The market, which drew 100,000 shoppers a day and had a turnover of more than USD10.2 million a year, was famous for selling fake brand-name goods.
Authorities had been trying to demolish the market since 1997 because its narrow thoroughfare was considered a fire hazard.
The agency reported that a new indoor market would house the existing stalls.