The incident happened at Black's Centra at the bottom of the town.
A man, who was wearing a balaclava, entered the premises at 1.24 am this morning and produced what gardai described as "a large knife" and demanded cash from an employee.
A small amount of cash was handed over.
Gardai, who had been on patrol nearby, were at the scene within minutes but the man had made his getaway.
It's understood that the employee was shaken by the incident.
Gardai have issued a description of the male who raided the shop.
He is described as being dark skinned with a foreign accent, but with good English.
He was wearing a blue and black bomber jacket with a hood and a black cap with holes in it that covered his face.
This is the latest in a series of similar incidents in Letterkenny during the past two months. In January the Checkout Store was robbed in Lower Oldtown Road, while the Hot Plate Take Away in Gortlee was robbed at knifepoint six weeks ago.
It is not known if there is any connection with this incident and others in the area.
Gardai are appealing for witnesses.
Anyone with information can contact them on 074 9167100 or on the confidential line 1800 666 111.
Shop owner, Jason Black has been outlining what happened to Donal Kavanagh on today's Shaun Doherty Show and is urging anyone with information to come forward: