According to the police, the 41-year-old suspect broke into the Kyoto Animation Co studio in the morning and poured a flammable substance, possibly gasoline, around it before igniting the place. He was detained and taken to hospital with injuries.
Japanese Prime Minister Shinzo Abe called the incident "too appalling for words" and offered condolences.
The blaze erupted at 10.30 a.m. when about 70 people were believed to have been working in the three-storey building. It raged for five hours until it was brought under control by firefighters.
Many bodies were recovered from the first and second floors of the studio. Knives were also found at the scene.
TV footage from the scene showed flames and smoked coming through the windows and roof of the building.
Kyoto police sources told Japanese public TV NHK that 33 people had died in the inferno, the country's deadliest in decades. 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.
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.
Images posted to social media appeared to show the suspect lying on the ground at the scene, surrounded by the police and with burns to his legs.
Police officials said the man admitted his guilt.
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.
One of the studio's managers said one or two company employees had received threatening e-mail in recent years and that lawyers were dealing with the incidents.
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 )