Rescue workers were on the job to retrieve the bodies from the badly-damaged building in Batala town of the district, an official told over phone.
A number of nearby buildings, including a car workshop, were badly damaged.
The cause of the blast is yet to be ascertained, he added.
Two teams of the National Disaster Response Force were rushed to spot to speed up the rescue operation.
Locals complained the firecracker unit was running illegally for the past many years. It were manufacturing and storing crackers for a 'nagar kirtan' - a religious procession relating to the birth anniversary celebrations of Sikhism's founder Guru Nanak Dev - slated to reach the town late Wednesday evening.
"The firecracker factory has been working in this locality for the many years. We have complained against the factory seven-eight times to the local administration, but no action has been taken against it," a local resident told the media.
He said a similar blast occurred in this area in January 2017, leaving one person dead and three injured.
Expressing anguish over the loss of lives, Chief Minister Amarinder Singh said rescue operations were underway with the Deputy Commissioner and the Superintendent of Police heading the relief efforts.
Gurdaspur MP Sunny Deol too expressed grief over the blast.
"Saddened to hear about the news of blast in Batala factory. NDRF teams and local administration has been rushed for rescue operation," Deol tweeted.
( With inputs from IANS )