Four men have died after a building in central Madrid was ripped apart by an explosion caused by a suspected gas leak. 

Among them was a 36-year-old Catholic priest. He was originally listed as one of the 11 injured by the blast in Madrid's La Latina district on Wednesday after being pulled from the rubble by emergency services and taken to hospital. 

However, he died in the early hours of Thursday morning after succumbing to his injuries, the Madrid archdiocese said in a statement. 

The building, which was almost completely destroyed in the explosion, belonged to Church of the Virgin de la Paloma and San Pedro el Real located next door and provided training for priests and meals for the homeless.

The top five floors were completely destroyed, with the walls blown out, while the bottom two floors were still mostly intact, but heavily damaged by fire. At least 15 cars were destroyed by the blast.

Madrid's archbishop Carlos Osoro Sierra visited the site, writing on his social media account that he would pray for the Christian community and the victims. 

Electrician David Santos Muñoz, a 35-year-old father of four, was identified as one of the dead. He had been fixing the building's boiler on the top floor.

Two men walking in the street were also killed by the explosion. Bulgaria's foreign ministry confirmed one of them was a 47-year-old Bulgarian citizen.

Officials originally reported an 85-year-old woman had died but they later said the victim was a man.

All available evidence showed the blast was most likely caused by a gas leak, Madrid's emergency services said, with local residents reporting a strong smell of gas before the explosion.

"It was completely nerve-racking ... I heard and felt the explosion but didn't know where it came from," said local resident Isabel Romero, whose eight-year-old son is a student at a school next to the destroyed building.

"All of the windows in one of the classrooms shattered and the children were very shaken."

After tons of debris fell into the school's playground, one local said things would have been much worse had the children not been forced to play inside because of the snow.

Rescue workers also had evacuated elderly people from a care home next door.

"There were just over 100 people inside at the time," Antonio Berlanga, director of the four-storey Los Nogales La Paloma residence, told Spanish public television. However, no one from the home was injured.

Spain's Prime Minister Pedro Sanchez has since offered his condolences to the families of the dead and the injured.