The thunderous blast also damaged 50 surrounding homes, some as far as 500 yards away, said local military commander Hazrat Ali.
Ali and the Jalalabad police chief, Haji Ajib Shah, initially reported about a dozen people killed. Ali called it "a tremendous explosion," and said, "The number of dead will probably rise because of people dying in the hospital."
Seven hours after the 12:30 p.m. blast, national television said the death toll stood at 25.
Ali at first speculated the explosion was caused by a car bomb. But the deputy governor of Nangarhar province, Dr. Mohammed Assef Qazi Zada, said the blast may have been an accident because explosives were stored at the site, the Afghan Islamic Press reported. An investigation was under way.
Zada ruled out the possibility of any subversion or terrorism.
"It is not an act of terrorism. There is no possibility of subversion in it," he said.
The 12:30 p.m. explosion in western Jalalabad, 70 miles east of Kabul, the capital, occurred at a maintenance facility of the Afghan Construction and Logistics Unit, which was founded as a non-governmental organization, but has since become a private company.
The blast came after several incidents in recent weeks — including the assassination of a vice president and the discovery of an alleged would-be car bomber in Kabul — put Afghan security forces on alert against possible terror attacks by resurgent Taliban or al Qaeda forces.
The explosion occurred just 200 yards from a hydroelectric dam, and damaged the dam's electrical works, along with the power system for nearby Jalalabad University and the surrounding district, police chief Shah said. The building was still burning two hours after the blast, Ali said.
He said, without further explanation, that three staff members, including the second-ranking officer of the organization, had been taken into custody for questioning about the blast.
The organization, known as ACLU, was founded as a non-governmental organization with U.S. funding to do road-building and other construction, but U.S. support was withdrawn about a decade ago. The unit has since continued operations as a private concern fulfilling contracts from international organizations.
During the Taliban's 1996-2001 government, the founder of the organization, known as Engineer Karim, was jailed when he refused to take a Taliban representative onto his advisory board.
Friday's explosion struck in a city and province where tensions run high eight months after a U.S.-led military campaign brought down Afghanistan's Taliban government.
The longtime Nangarhar governor, Haji Abdul Qadir, a national vice president, was slain on July 6 in a still-unexplained assassination in Kabul. Jalalabad residents have staged regular protests since then, demanding the arrest of his killers. Suspicions point in many directions in fractious post-Taliban Afghanistan.
Three months earlier, the new Afghan defense minister, Mohammad Fahim, escaped injury when a bomb exploded near his convoy in Jalalabad. Five people were killed in that blast.
Nangarhar is suspected of harboring fugitive Taliban figures and holdouts of the al Qaeda terrorist network, who could easily cross to and from the poorly controlled tribal lands of neighboring Pakistan. The province is also an important opium-production and smuggling area.