Embakasi police boss Wesley Kimeto confirmed at least two people died from the incident, one adult and a minor, as of 4:30 am.
He said the number may increase as the day breaks.
Video posted on social media shows a huge fire raging close to blocks of flats.
Government spokesperson Isaac Mwaura said gas cylinders were being refilled when the fire broke out just before midnight on Thursday.
The cause of the fire remains unknown, Mwaura said.
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Firefighters and emergency services are at the scene where Kentainers Company Ltd is based, according to police.
At least 167 victims so far treated at Mama Lucy Hospital in Nairobi including 142 adults and 25 children, many with inhalation injuries.
About seven of the critically injured victims were referred to Kenyatta National Hospital (KNH) and 17 others to Kenyatta University Hospital.
Several patients were treated and discharged from the facility since 1:30 am on Friday.
Witnesses said they felt tremors immediately after the blast.
The Kenya Red Cross said on social media crews have been “tirelessly battling the flames” and said that 29 people had been taken to hospital with injuries.
The blaze spread through several apartment complexes, leading to fears the number of casualties could rise further.
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