Turkey's coast guard in the town of Marmaris, across the narrow straight separating the Greek island from the Turkish mainland, said the explosions were part of routine naval exercises.
"There are navy maneuvers today off the Marmaris coast so such sounds are normal, a spokesman for Turkey's coastal security command told Reuters in Ankara by telephone from the port city of Marmaris.
But a police official in Marmaris also said the blast was most likely connected with the Turkish war games.
There was no Greek naval activity off the island, the Defense Ministry said.
Corfu police denied earlier reports that an explosion occurred on the island.
Despite a recent improvement in relations, many disputes remain unresolved between Greece and Turkey such as territorial claims over small, unpopulated islands in the Aegean Sea.
The two NATO nations have nearly gone to war three times in the past 26 years.
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