Ukrainian officials have confirmed one of the chemical plants in the rebel-held region of Donetsk has been hit.
Kiev forces are thought to be behind the shelling though it is yet to be officially confirmed.
As soon as the deadly blast hit the chemical facility, glass window of residences in the vicinity shattered.
The plant is known to be manufacturing products for industrial explosives and ammunition.
The explosion took place at about 23:00 local time. The pro-Russian separatists have said the Ukrainian troops are to be blamed for the attack.
"The fire has been contained. There is not threat of chemical spill... Most likely it was a high-calibre artillery shell," a local daily quoted a military source as saying.
The same plant has undergone attacks on earlier occasions as well as during the months-long Ukrainian conflict.
"The plant has been in maintenance since the Soviet times. It is unique. We do not have any information yet on whether it was Tochka-U or targeted shelling [that hit the chemical plant]. The investigation is underway, and we will report on the results as soon as they are ready," Eduard Basurin, a representative of the defence ministry of the self-proclaimed Donetsk People's Republic told Russia's Rossiya 24 TV.
The fighting between Ukrainian forces and pro-Moscow rebels has increased in recent days claiming several civilian lives.