Reports from the site described a scene of chaos with several passenger cars badly damaged and many dead and injured.
"The blast derailed 13 coaches of the Gyaneshwari Express. These coaches then fell on the other track where a goods train rammed into some of them," Soumitra Majumdar, a railway spokesman, told Reuters news agency, pointing to a suspected explosion as the cause of the crash.
"We fear many casualties. There could be many people dead. We don't have details yet."
Bhupinder Singh, the chief of police in West Bengal, said many passengers were still trapped in the mangled coaches.
"It seems there are still a large number of passengers trapped in the carriages - dead or alive, we are not sure," he said.
Rescue workers with bolt cutters struggled to force their way into the most badly-damaged coaches to try and free anyone still alive inside.
Paramedic teams treated the injured on the side of the track, while the most serious cases were taken away by air force helicopters.
Mamata Banerjee, India's railways minister, rushed to the scene of the collision early on Friday.
"The fear is that this was a Maoist attack," she said.
"The railways are a soft target. They are a lifeline ... which the Maoists have attacked in the past and, it seems, even now."
Maoist fighters in the area have been blamed for a series of attacks on police, government buildings and infrastructure such as railway stations.
The rebels had called for a four-day strike in the area starting on Friday.
In recent months they have stepped up attacks in response to a government security offensive to clear them out of their jungle bases.
Earlier this month an attack on a bus in the mineral-rich state of Chhattisgarh killed 35 people.
The Maoist insurgency began in West Bengal state in 1967 in the name of defending the rights of tribal groups, and has since spread to 20 of India's 28 states.
Manmohan Singh, India's prime minister, has described the insurgency as India's biggest internal security challenge.