The blast left four workers injured, although their employer, Tokyo Electric Power (Tepco), said the injuries were not life-threatening.
Japanese television warned people to stay indoors, turn off air conditioning and not drink tap water, amidst fears of a meltdown.
But the top government spokesperson said tens of thousands of people within 10
kilometres of the plant should evacuate, calling for a "calm response” while saying radiation was "at assumed levels".
Prime Minister Naoto Kan's right-hand man, Chief Cabinet Secretary Yukio Edano, said that the Tokyo Fire Department would send a "hyper-rescue team" to the site.
He also said the government was taking contingency measures and collecting iodine, with can be used against radiation sickness.
A state of emergency has been declared at five nuclear reactors.
Kyodo said radioactive caesium had been detected near the site, quoting the Japanese nuclear safety commission. Radioactivity rose 20-fold outside, reports said.
The plant "may be experiencing nuclear meltdown", Kyodo and Jiji reported before the explosion, while public broadcaster NHK quoted the safety agency as saying metal tubes that contain uranium fuel may have melted.
The cooling system of the plant was, leaving authorities scrambling to fix the problem and evacuate more than 45,000 residents within a 10-kilometre radius.
Thousands were also evacuated from near a second plant, Fukushima No. 2,
which also suffered damage to its cooling system.
Parts of the N° 1 reactor's nuclear fuel rods were briefly exposed to the air Saturday after cooling water levels dropped and a fire engine was pumping water into the reactor, Jiji Press reported.
Hundreds of bodies were found along the coast after the tsunami which followed the earthquake.
More than 215,000 people were in emergency shelters, police said, and the full scale of those left homeless was believed to be much higher.
The tsunami has killed at least one person across the Pacific in California. Waves 2.4 metres high hit the coast of the US states of California and Oregon. Mass evacuations have taken place on the American continent.