The explosion highlighted the scale of the disaster facing Japan following Friday's 8.9-magnitude earthquake and 33-feet (10-meter) tsunami that devastated the country's northeastern coast.
Dramatic TV footage showed the blast ripping through the aging coastal facility, sending plumes of smoke billowing high into the air.
"We are now trying to analyze what is behind the explosion," said government spokesman Yukio Edano, warning that people nearby should quickly evacuate. "We ask everyone to take action to secure safety," he said.
Edano confirmed that there had been a radiation leak at the plant, and broadcaster NHK said the evacuation radius around the plant was doubled to 12 miles (20 kilometers).
Radioactivity at the plant was 20 times over the normal level, and hourly radiation matched the allowable annual dose, Kyodo news agency reported earlier.
The government said a "hyper rescue team" was being sent to the facility from capital Tokyo, which is 160 miles (250 kilometers) away to the south.
Wind in the area was weak and blowing the smoke out to sea towards the northeast, weather authorities said.
Several workers were reported to be injured in the explosion -- one seriously -- and smoke was seen billowing out of the plant. Eyewitnesses reported strong shaking at the plant shortly before the blast.
"A seriously injured worker is still trapped in the crane operating console of the exhaust stack and his breathing and pulse cannot be confirmed. Currently, rescue efforts are underway," nuclear company TEPCO said in a statement.
TV channels warned nearby residents to stay indoors, turn off air-conditioners and not to drink tap water. People going outside were also told to avoid exposing their skin and to cover their faces with masks and wet towels.
Parts of the reactor's nuclear fuel rods were briefly exposed to the air after cooling water levels dropped through evaporation, and efforts were earlier being made to pump water into the reactor at the site. The plant's sister plant, Fukushima No. 2, was also experiencing cooling problems.
Loss of cooling water resulted in a near meltdown of the Three Mile Island reactor in Pennsylvania in 1979, the worst nuclear incident in US history.
If coolant is not restored, the result could be what is known as a meltdown - extreme heat can melt through the reactor vessel and result in a radioactive release, The Wall Street Journal reported.
Reactors have containment domes to catch any release. But there is always the chance that an earthquake could create cracks or other breaches in that containment system.
The explosion came hours after a visit to the plant by Prime Minister Naoto Kan, who described the devastation in northeast Japan as "huge."
Entire towns remain underwater, buildings have been destroyed, landslides have wiped away huge swathes of the landscape - carrying houses with them - and fires were still burning in the middle of the water, fueled by leaking oil.
The death toll was rising as the scale of the disaster unfolded through Saturday. Kyodo news agency said the number of people dead or missing was feared to be above 1,600.
Government spokesman Edano warned residents in hard-hit coastal areas to seek higher ground amid reports of further aftershocks and tsunami measuring 10-feet (three meters).
The amazing power of the quake was made clear by the US Geological Survey (USGS), which revealed the main island had shifted eight feet (2.4m) and shifted the Earth on its axis.
TV news stations showed dramatic footage of people being rescued from their rooftops by helicopters and emergency personnel dug through rubble.
"I realized the huge extent of the tsunami damage," Kan said after returning to Tokyo. "What used to be residential areas were mostly swept away in many coastal areas and fires are still blazing there."
Japan mobilized 50,000 military and other rescue personnel to spearhead the Herculean rescue and recovery effort, AFP reported, and reached out to countries including Britain for assistance.
Four trains remained unaccounted for, Kyodo reported, after they were caught in the tsunami while running in a coastal area of Miyagi and Iwate prefectures. It is not known how many people were aboard.
More than five million homes remain without power and the number of partially or completely destroyed buildings has reached 3,400. More than 215,000 people were in emergency shelters and rescue officials struggled to access most of the tsunami-hit areas.
US President Barack Obama, speaking at a news conference at the White House Friday, referred to the "potentially catastrophic disaster" and said in a conversation with Kan he had "offered whatever assistance is needed."
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