Madrid's emergency services say rescue teams, firefighters and police are working in a central area of the Spanish capital following an explosion that witnesses described as ``extremely loud.''

Videos and images shared on social media showed a tower of smoke coming out from a building and rubble scattered in a central street of Madrid. Spanish public broadcaster TVE said the explosion took place in a building near a nursing home.

Leire Reparaz, who lives near the Puerto de Toledo, a local landmark, told The Associated Press that she heard a loud explosion.

``We didn't know where the sound came from. We all thought it was from the school. We went up the stairs to the top of our building and we could see the structure of the building and lots of grey smoke,'' the 24-year-old Madrid resident said.