Two train carriages overturned in the tunnel just outside the Jesus Metro station, apparently after a wheel broke on a curve, officials said. About 150 people were evacuated from the station.
Investigators said a tunnel wall might have collapsed onto the carriage, according to news reports.
Officials ruled out a terrorist attack in a country still nervous after the train bombings that killed 191 people in Madrid in 2004.
"Everything indicates that it was an accident, that the train derailed and was hurled against the walls of a tunnel," an interior ministry spokesman said.
Authorities said another 47 people were hurt, two of whom are in criticial condition.
A fire brigade spokesman said that all the passengers trapped in the metro train between stations had been taken to safety by rescue services.
Field hospitals were set up in the
street outside the metro station
Emergency services set up two field hospitals in tents on the street and a judge arrived to supervise the removal of bodies. Hospitals appealed for blood donors.
Rita Barbera, the mayoress of Valencia, told reporters that the accident was "a catastrophe, a tragedy."
Hundreds of thousands of people are beginning to arrive in Valencia for this week's World Meeting of the Families, which will be attended on Saturday and Sunday by Pope Benedict XVI.
More than 60 million people used Valencia's subway system in 2005, according to the network's website, which averages some 165,000 people a day. The subway has four lines and 116 stations.