Norway bomb: Deadly blast rocks Oslo
• Smoke is seen rising from the damaged building and debris is strewn across the street in this image taken from TV. Picture: AP
Norway's public broadcaster NRK said two fatalities have been confirmed.
The loud explosion shattered windows and led to evacuations of office buildings near the government headquarters.
Police later confirmed that a bomb had caused the explosion.
Meanwhile, police say they are sending anti-terror forces to a youth camp outside Oslo after reports of a shooting.
The news site VG reported that a man dressed in a police uniform opened fire at the camp. It says several people were injured, however, one witness, speaking to public broadcaster NRK, claims to have seen more than 20 bodies at the scene.
Oslo police chief Anstein Gjengdal said anti-terror units were being sent to the camp at Utoya, outside the Norwegian capital.
He had no other information on that incident, which came hours after the bomb blast outside the government headquarters killed.
In Oslo, the damaged buildings include the office of Norway's Prime Minister Jens Stoltenberg, who is safe, government spokeswoman Camilla Ryste told The Associated Press.
Witness Ole Tommy Pedersen was standing at a bus stop about 100 yards from the building at around 3.30pm (2.30pm UK time) when he saw the blast shatter almost all windows of the 20-floor building. He said a cloud of smoke is billowing from the bottom floors.
"I saw three or four injured people being carried out of the building a few minutes later," Mr Pedersen told The Associated Press.
Nearby offices were evacuated including those housing some of Norway's leading newspapers and news agency NTB.
An AP reporter at the scene saw one person with a bleeding leg being led away from the area.
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Video shown by Norwegian broadcaster NRK showed most of the windows of the building had been blown out.
The bottom floor appeared to be completely gutted. Shattered glass and debris littered a square in front of the building.
Nearby offices were evacuated including those housing some of Norway's leading newspapers and news agency NTB. Some of them were also damaged.
The government building houses the prime minister's office and his administration. Several ministries are in surrounding buildings.
The blast comes as the Scandinavian country has grappled with a series of homegrown terror plots linked to al Qaida, and six years after an uproar over cartoons of the Prophet Mohammed in neighbouring Denmark.
Last week, a Norwegian prosecutor filed terror charges against an Iraqi-born cleric for threatening Norwegian politicians with death if he's deported from the Nordic country.
The indictment centred on statements that Mullah Krekar - the founder of the Kurdish Islamist group Ansar al-Islam - made to various media, including American network NBC.