According to Palghar Control police official Pramod Pawar, the blast occurred around 11.15 pm in the chemical company's plant.
There are no immediate reports of casualties in the incident as firefighting efforts were taken up.
"The blast, cause of which is not yet clear was so deafening that it was heard in a radius of 10 km, and houses and buildings were shaken," Mr Pawar told IANS.
The blast, prima facie is suspected to have occurred in a boiler room and efforts were on to douse the fire in the factory precincts.
Local eyewitnesses said that the explosion, "sounding like a huge bomb" happened when many were preparing to retire for the night.
However, scared and shaken by the explosion, many feared it was an earthquake and hundreds rushed out on to the streets and sat there.
Further details are awaited and senior civil and police officials besides disaster management teams have rushed to the spot.