Around 50 people were injured in the incident, which occurred in the town of Vila Nova da Rainha, Tondela, around 250 kilometres north of Lisbon, a fire brigade spokesman told the news agency Lusa.
Although the flames were extinguished quickly, panic reigned for "five or six minutes" inside the multi-storey building, an eyewitness told newspaper Publico.
Tondela's mayor, Jose Antonio Jesus, described the incident as "a catastrophe," to the newspaper.
Over 170 firefighters, rescue workers and police were reportedly involved in bringing people to safety. Three helicopters were also used in rescue operations, with the injured, suffering from burns and smoke inhalation, brought to nearby hospitals.
The cause of the explosion, which took place as visitors ate dinner, took part in a card tournament or watched football, was unclear though some eyewitnesses told local media that a woodburner exploded on one of the upper levels of the building.