The mid-morning explosion ripped through a two-story shopping pavilion at the Cherkizovsky market in northeastern Moscow.
It set the building alight and sent panicked traders fleeing out onto the street.
Nuri Magomedov witnessed the blast. He told RFE/RL's Russian Service it occurred at a time when the market was crowded with shoppers and vendors.
"I felt the blast wave instantly and saw everything go up in the air," Magomedov said. "I rushed to see if there was anybody I knew at the site. When I got there I saw dead bodies. There were four dead bodies. There were two children. And there was a strong smell of gunpowder."
Early reports suggested the explosion may have been the result of an accidental malfunction in a gas container. Such containers are typically used for cooking and heating in marketplaces.
But Moscow Deputy Mayor Vladimir Resin later told journalists the blast appeared to have been intentional, saying it was the result of an improvised explosive device.
"Investigators, prosecutors, police and FSB [security service] personnel are working now to establish the cause of the explosion," Resin said.
Investigators said the impact of the explosion was equivalent to between 1 and 1 1/2 kilograms of TNT. It destroyed about 200 square meters of stalls, and badly damaged the pavilion roof.
In all, 35 people were hospitalized with injuries following the blast. Six are in a criticial condition.
The identities of the people killed in the explosion remain unknown.
A correspondent with RFE/RL's Russian Service reported many of the victims were Chinese and Vietnamese nationals. Eight were reported to have been killed at the site of the blast; two others died in hospital.
The explosion immediately sparked fears of a terrorist attack. The Russian capital has been the target of a number of bombings orchestrated by Chechen militants.
But Moscow chief prosecutor Yury Syomin said investigators believed warring criminal gangs were responsible for the blast.
"Most likely it was connected with a commercial dispute or a dispute between criminal groups," Syomin said. "As for a terrorist attack as the possible cause, I don't think it is ruled out completely, although there is no concrete evidence indicating that there was a terrorist act as it is defined by the law. But this version will also be examined."
The Cherkizovsky market saw a string of fires last year, the worst of which destroyed one of the trade pavilions and a number of kiosks.
In February this year, more than 60 traders -- nearly all of whom were from Central Asia and the Caucasus -- were killed when the roof of Moscow's Baumansky market collapsed under the weight of heavy snow.
(with material from agency reports)