Spectacular footage showed the Proton-M rocket veering off its trajectory just seconds after its 6:38 am (0238 GMT) launch, before falling apart in mid-air, erupting into a ball of flames and unleashing clouds of noxious black smoke.
"It seems something is going wrong," said a Russian television commentator during the live coverage of the launch at the Baikonur cosmodrome in the Central Asian state of Kazakhstan.
President Vladimir Putin had been informed of the accident, the Kremlin said in a statement.
The rocket, which fell to the ground some 2.5 kilometres from the launch pad at the cosmodrome that Russia leases from Kazakhstan, was supposed to take three Russian Glonass-M navigation satellites into space.
The rocket carried 600 tonnes of kerosene, heptyl and amyl which are highly poisonous components of rocket fuel, said the head of the Kazakh space agency, Talgat Musabayev.
The Russian space agency Roskosmos, citing preliminary information, said the accident caused no damage or casualties but the crash site was immediately cordoned off and residents of nearby towns including Baikonur were told to stay indoors and keep their windows shut.
Kazakh officials played down the immediate danger to people, saying a lot of the fuel had burned in the air.
A spokeswoman for the Kazakh space agency told AFP that officials had found no traces of heptyl and amyl in the air and soil samples taken at 0600 GMT.
Locals said the explosion sounded like thunder and that they were not unduly concerned about their safety.
"They asked us to stay indoors and not to open windows," said Mukhtar Umurzakov, a 46-year-old driver, who lives in the town of Kyzyl-Orda some 300 kilometres (185 miles) from Baikonur.
Officials in Kazakhstan said earlier today that a cloud of fumes that had formed over the cosmodrome could move beyond the area.
Head of the emergencies ministry in Kazakhstan, Vladimir Bozhko, said that early indications showed the accident was caused by a malfunction of a first-stage engine.
Experts say the disaster is a major blow to the reputation of the reliable Proton-M rocket.
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