Eye witnesses said that the number of casualties was between 90 and 150, Aljazeera correspondent reported.
They also told Aljazeera correspondent that some people were still trapped under the rubble.
US sources, however, said the number of casualties was low, but refused to provide any figures.
Sources, however, told our correspondent that two bodies had been recovered as well as a man who was on fire.
US forces prohibited Aljazeera crew from getting closer to the shattered site and, therefore, no exact confirmation of the situation could be made.
The explosion took place when a number of looters were taking out equipment for scrap metal for the purpose of selling them.
US sources said a cigarrette may have triggered the explosion, especially since looters had been emptying gunpowder from ammunitions' cases before taking the latter away.
Meanwhile, three Iraqis traveling in a car were killed at a US checkpoint in Abu Ghraib city, southwest of Baghdad, Aljazeera reported.
The circumstances surrounding the killings could not be immediately known.
Eyewitnesses said one of the victims was shot in the chest.
People of the nearby city of Falluja said US soldiers transported the three bodies to Falluja Hospital and apologised for the killings before they left.
Military campaign continues
In the meantime, US occupation forces continued with Operation Desert Sidewinder on Monday, saying it was to crush growing Iraqi resistance which they blamed on loyalists of the ousted Baath Party regime.
The operation is taking place along a stretch of the Tigris River, between Baghdad and Samaraa, about 125 km north of the capital.
The area is on the road that leads to former Iraqi President Saddam Hussein's hometown of Tikrit.
US Central Command (Centcom) said the military campaign was the third, aimed at rooting out “various subversive elements attempting to undermine” the occupation forces.
US forces have detained more than 60 people under the new operation, which was announced on Sunday.
In a related development, Britain has decided to dispatch a senior police officer with experience in Northern Ireland to help train Iraqi police, the Financial Times reported on Monday.
The paper said that Stephen White, an assistant chief constable from Northern Ireland, would be sent to the southern city of Basra.
The London-based newspaper did not give a source.
But a Foreign Office spokeswoman confirmed that an officer with Northern Ireland experience was going to Iraq.
Last week, six British military policemen were killed and eight wounded in two separate resistance operations in Iraq.
Meanwhile, British Labour MP Eric Illsley said a British official would be cleared of charges that he had manipulated intelligence information to bolster the campaign for war on Iraq.
A parliamentary committee has been examining allegations that UK Prime Minister Tony Blair’s top aide, Alastair Campbell, had misused the information to persuade public opinion to go to war.
But Illsley, who is a member in the committee, said secret documents, presented by Foreign Secretary Jack Straw showed that Campbell did not manipulate the information.
Japan is also planning to take part in the US-led occupation of Iraq by sending more than 1,000 troops to the war-torn country, according to a Tokyo newspaper.
Japanese troops would be deployed in Iraq after passing a new legislation in late July, the paper said on Monday.
Other countries, such as India and Pakistan, are also debating the possibility of providing troops to support US forces in Iraq.
The US is seeking such international participation to obtain relief for its troops as well as gain further international legitimization of its occupation of Iraq.