"The vehicle has broken up," said NASA commentator George Diller, after NASA television broadcast images of the white rocket falling to pieces.
"At this point it is not clear to the launch team exactly what happened."
The disaster was the first of its kind for the California-based company headed by Internet entrepreneur Elon Musk, who has led a series of successful launches even as competitor Orbital Sciences lost one of its rockets in an explosion in October, and a Russian supply ships was lost in April.
Moments later, a SpaceX commentator said the video link from the vehicle had been lost.
"There was some kind of anomaly during first stage flight," the commentator said, noting that the rocket had ignited its nine Merlin engines and reached supersonic speed.
"However, it appears something did occur during first stage operations," he added, referring to the stage of rocket flight before the cargo ship would have been able to separate from the first stage of the rocket and reach orbit.
The capsule blasted off at 10:21 am (1421 GMT) from Cape Canaveral, Florida, atop the Falcon 9 rocket.
Countdown was normal and the weather was clear, posing no concerns ahead of the launch.
After liftoff, SpaceX had planned to make a third try at a controlled, upright landing of its Falcon 9 rocket on an ocean platform with the goal of one day making rockets as reusable as airplanes.
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