The blast, which occurred in a building on Toledo Street, caused widespread damage, according to video footage tweeted out by the Madrid city hall emergency information service, Emergencias Madrid.
At least four floors have been impacted by the explosion and firefighters are evacuating people from the area, the service said. The building could be at risk of collapse, the mayor added.
Those killed were an 85-year-old woman and a man whose age was not immediately known, a spokesman for the emergency services told CNN. Two of those injured were taken to the hospital, one suffering from a broken ankle, he said.
No injuries were suffered either by senior citizens living at a care home next door to the building where the blast occurred or at a neighboring school, the spokesman said.
“Various people are being treated, (for injuries) of various severity,” Madrid Mayor José Luis Martínez Almeida told journalists.
Martínez-Almeida urged caution as the authorities were still getting more details after the blast. “It seems there was a gas explosion,” he said.
Police officers are at the scene, a spokesperson for the Spanish National Police told CNN.
All residents from the elderly care home have been evacuated, said the director of Los Nogales residence, Antonio Berlanga.