The building was undergoing renovation work at the time an interior wall gave way.
National newspaper Correio da Manhã (CM) reported three stories of the building caved in, burying two construction workers.
The fatalalities are two Portuguese men, aged 53 and 56, a mason and a labourer, named by CM as Armindo Monteiro and José Manuel Soares from Fafe.
They were working on the renovations at the time the inside collapsed.
A third employee, who was also working on the building, managed to escape in time and survived the incident.
The accident happened at around noon, with the first death being confirmed about two hours later and the second body being pulled from the rubble later that evening.
Traffic was cut off around the area and a security perimeter set up while search and rescue operations took place with sniffer dogs.
The renovation project was being undertaken by the Braga-based Casais Group.
The Work Inspection authority is investigating to establish the cause of the accident.
Newspaper Diário de Notícias (DN) reports that Portugal has notched up over 100 deaths per year caused by work-related accidents since 2014.
So far this year, the newspaper claims, 114 people have died in work accidents, the majority of which have been in the workplace.
Speaking at the scene, Labour Inspector-general Pedro Pimenta Braz served up harsh criticism, telling reporters “it is extremely worrying that, in the middle of Lisbon city, capital of an EU country, two people died while working. It is horrible. Two people who had started their working week and who disappeared on a construction site.”
During the first half of this year construction work was reportedly being carried out on more than 130 buildings in Lisbon.
DN elaborates that the construction sector was responsible for 34 of the 114 work-related deaths registered this year.
Inspector-general Pedro Pimenta Braz slammed the “instability” of remodelling work, like which was being carried out on Rua Alexandre Herculano, saying “a wall collapsed and these were the consequences.
“Instability in construction and demolition cannot exist. That is why there are security plans”, he said.