Madrid mayor, José Luis Martínez-Almeida, who spoke to journalists at the scene confirmed that at least two people had died in the explosion and others had been taken to hospital for treatment. 

Emergency services later confirmed the two fatalities and said six people were people treated for light injuries, one for moderate injuries and another who was in a serious condition and had been taken to Madrid's La Paz hospital for treatment.

By 6pm the confirmed death toll had risen to three with the victims identified as a 85 year old woman and a young man who was carrying out maintainence in the building. Their names will not be released until their families have been informed.

The government's delegate for Madrid, José Manuel Franco confirmed a third death but provided no details he also confirmed that the blast was caused by a gas explosion.

A 36-year-old man is reported to be fighting for  his life in hospital after being caught in the explosion.

Footage captured from people at the scene showed the destruction of the top four storeys of the residential building at number 98 on Calle de Toledo.

The collapsed building is reportedly a religious complex owned by the Catholic Church that provided residential training for priests and gave meals for the homeless.

Church authorities confirmed that priests from the nearby Iglesia de La Paloma lived on the fifth and sixth floors of the building.

A huge plume of smoke was visible across the area near Puerta de Toledo as fire engines raced to the scene and police cordoned off the zone.

Emergency services evacuated nearby buildings.

Reports initially suggested the explosion affected a residential home for the elderly and according to Google Maps, the damaged building is located next to a school.

However reports later confirmed that no injuries were reported among residents at the elderly care home or at the school. 

Antonio Berlanga, director of the Los Nogales residence in Madrid which is located next door to the explosion site told TVE that none of the residents had been injured in the blast. he confirmed that all residents had been safely evacuated from the building and safely relocated to a cafe and hotel nearby.

Debris could be seen spread across a wide area.

Neighbours reported hearing the loud explosion which shook windows across the area. 

“Nine fire crews and 11 ambulances have gone to Calle Toledo following an explosion in a building,” local emergency services confirmed.

IN PICS: Blast in central Madrid destroys residential building