Large flames and plumes of smoke could initially be seen shooting horizontally from the bottom of the rocket.
The entire structure was then engulfed by fire.
It comes three months after the first rocket test at the site on Unst was carried out and declared a success.
On that occasion, RFA fired their engines for eight seconds before shutting down.
A statement from SaxaVord Spaceport said all safety protocols were fully observed and the site was evacuated prior to the test, leaving no staff at risk.
A spokesman said: “This was a test, and test campaigns are designed to identify issues prior to the next stage.
“We will work with RFA to understand and learn from the causes and support them as they move forward to the next phase of their preparations.”
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