The blast - which rocked homes and buildings in several surrounding villages - was followed by a huge fire with clouds of black smoke billowing out, Shirpur Police Station Senior Inspector Shivaji Budhane told .
Another 12 people were reported missing and the condition of around 10 injured was "critical".
The blast is believed to have taken place in a chemical-filled boiler of the Mumbai-based Rumit International company's Rumit Chemisynth factory in Waghadi area, around five kilometres on the outskirts of Shirpur.
Budhane said the process was on to book the company officials after completing the investigation into the tragedy, which occurred around 9.45 a.m.
There were an estimated 100 workers present in the factory at the time and considering the intensity of the blast - audible in over a 15-km radius - and the blaze which engulfed it, officials fear the casualty figure could increase.
Early pictures of the blast site showed a factory building with all its walls blown off leaving behind a skeletal structure, and neighbouring buildings had sustained huge damage.
Chief Minister Devendra Fadnavis expressed sorrow over the loss of lives and casualties and reviewed the situation arising out of the blast with officials this afternoon.
"The fire is now under control. A team of the State Disaster Relief Forces has also rushed to the spot," he said.
Fadnavis announced an ex-gratia of Rs 5 lakh to the victims' next of kin.
Union Home Minister and BJP President Amit Shah expressed shock over the tragedy and said he has spoken to the state government in the matter.
"Anguished to learn about the loss of lives due to explosion at a chemical factory in Dhule...Spoken to Fadnavis and the state government is providing relief to the people," Shah said.
Governor C.V. Rao also expressed deep anguished over the tragedy and condoled the families of the victims, and prayed for the speedy recovery of the injured.
Terming the incident as "unfortunate", Congress' Leader of Opposition Vijay Wadettivar sought a high-level enquiry into the mishap and booking of all those responsible for negligence.
He also urged Fadnavis to enhance the compensation to the families of the victims to Rs 10 lakh and Rs 2 lakh to all the injured.
Later this evening, Labour Minister Sanjay Kute announced a probe into the incident by the Labour Commissioner.
( With inputs from IANS )