According to the police, a man broke into the Kyoto Animation Co studio in the morning and poured what appeared to be gasoline around the studio and set it on fire. The 41-year-old suspect was detained and taken to hospital with injuries.
The Kyoto Fire Department had earlier said that 13 people died in the three-storey building, where about 70 people were believed to have been working when the fire erupted at around 10.35 a.m.
It said that 10 people were later found with "no vital signs" inside the building. Reports said that at least 36 people were in hospital, some of them in a critical condition.
The police said some people witnessed the suspect screaming "drop dead" as he set fire to the building. Many bodies were found on the second floor of the building. Knives were also found at the scene.
Eyewitnesses said they heard a series of explosions and saw black smoke billowing out of the building. People were later seen being carried out of the studio covered in blankets, Kyodo News reported.
"A person with singed hair was lying down and there were bloody footprints," a 59-year-old woman who lives nearby told Kyodo News.
"I heard a bang. The black smoke rose and the burning smell was awful," said a hair salon manager.
Kyoto Animation, known for short as "KyoAni" in Japan, has produced popular TV animation series including "K-On!" and "The Melancholy of Haruhi Suzumiya" (Suzumiya Haruhi no Yuutsu), which depict the daily lives of high school girls.
On social media, many fans expressed their shock and posted pictures of their favourite KyoAni shows.
A GoFundMe campaign titled "Help KyoAni Heal" was also started, with more than $50,000 raised in an hour.
( With inputs from IANS )