© Agence France-PresseAn official said the blast was not thought to have been caused by a bomb
The blast happened in the early hours of Thursday morning in a compound of warehouses in the east of the former capital. The cause is not known but it is not thought to have been a bomb.
The warehouses were said to contain chemicals and material used in construction and salt production.
At least five of those killed were reported to be firemen.
"There are many casualties," a police officer from Mingalar Taungnyunt township told Reuters news agency. He said the were still trying to establish numbers and further details.
The fire is believed to have started in a warehouse but spread to nearby wooden houses where people were sleeping.
"It was not a bomb explosion," one official told AFP news agency.
Witnesses say that the explosion was so intense that buildings up to a mile away were shaken.
Reports said some 30 firefighters who had been tackling the initial fire were injured as they were caught in the explosion.
"Many of the dead were hit by flying debris of broken walls and stone slabs that were flung on to the streets due to the explosion," witness Maung Win told the Associated Press.
A number of buildings nearby had been destroyed, including a Buddhist monastery, said AP.
"We heard a very loud noise from the explosion and saw smoke in the sky," a resident of Botahtaung township told AFP.
"Our building was also shaken by the explosion. We have no idea what's happening."
Firefighters spent several hours tackling the blast. An official said that by 06:00 local time (22:30 GMT on Wednesday) 12 men and five women were confirmed to have been died.
Witnesses said a scene of devastation was left behind, and a large crater where the warehouse had been.
Burma has been hit by a string of bombings in recent years, which the government blames on separatist groups, but it was not immediately clear what had caused the blast.
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