The blast took place around 3 pm (local time) yesterday at the Nanyang Export Fireworks Factory in Baofeng Village of Liling City when 47 workers were at the site, the rescue headquarters said.
The blast left 12 workers dead, 33 people injured, including three passersby, and two others were still missing.
Three workers escaped the blast unhurt, state-run Xinhua news agency reported.
Four severely injured people have been transferred to a hospital in Zhuzhou City.
The factory was cordoned off as the surrounding areas were scattered with debris and glass shards from broken windows of nearby village houses.
Liling City is a major production base for China's fireworks, which play a major role in traditional festival celebrations like the Lunar New Year.
The city government said the factory was licensed and the cause of the explosion is under investigation.
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