New York Mayor Bill de Blasio described the incident as "a tragedy of the worst kind," saying a number of people were still unaccounted for as firefighters battled to extinguish the blaze in East Harlem.
Witnesses said the explosion, which sparked inevitable reminders for some New Yorkers of the 9/11 terror attacks in 2001 that brought down the Twin Towers, felt like an earthquake.
There were 15 apartments in the two buildings that collapsed, de Blasio and city officials told reporters near the scene of the disaster at 116th Street and Park Avenue.
So far the only indication as to the cause of the blast was a call from an adjoining apartment building at 9:13 am alerting energy company Con Edison to the smell of gas.
The explosion came barely 15 minutes later, sparking a major fire and engulfing the area in a column of dense white smoke.
The New York Fire Department got an emergency call at 9:31 am, and firefighters were on the scene two minutes later.
"There was a major explosion that destroyed two buildings. The explosion was based on a gas leak," de Blasio said.
It is the first deadly disaster of its kind to strike the city of eight million since the Democrat took office in January and will raise concerns about safety in less affluent neighbourhoods.
"There was no indication in time to save people. We know we have lost two people already," the mayor said.
"There is a tremendous amount of anxiety, but suffice it to say that every effort is being expended to locate each and every one of these (missing) individuals," he added.
De Blasio was careful to caution that some of those missing could simply be safe elsewhere and out of contact.
A police spokesman told AFP that 22 people were injured -- two were in critical condition and five others in serious condition.
Witnesses compared the explosion to an earthquake and what they saw to a war zone, after the blast ripped through their bustling city routine.
Train services in and out of Grand Central Station in midtown Manhattan were suspended as a result of the incident next to its tracks.
Hundreds of police and more than 250 firefighters were on site with emergency trucks, as a dense column of smoke spewed into the sky over the Metro-North railway line, an AFP reporter said.
Con Edison confirmed to AFP that a resident reported smelling gas inside the apartment building at 1652 Park Avenue but indicated the odor may have been coming from outside.
"Our crews are checking our gas lines and working to isolate any leaks that they find and they're working closely with the FDNY to make the area safe," company spokesperson Bob McGee said.
Jazzmen Arzuaga, 30, told AFP she was at work at a hospital when her wife rang to tell her what had happened.
"She called me and told me 'Oh my God, you need to come home now, it's like World War II, people are dying, there was an explosion.' I just literally ran," she said.
The couple live across the street from the blast.
Arzuaga's wife Jay Virgo, also 30, said she was lying in bed when the blast blew her onto the floor.
"I ran out of the building and I looked across the street and there were a couple of people lying on the floor. There was glass everywhere, huge pieces of glass. It just looked crazy," she said.
The Metropolitan Transportation Authority said Metro-North trains had been suspended indefinitely in and out of Grand Central until further notice.
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Hope its not what Everyone is assuming. If you know what i mean!