The Marriott Hotel burns after the suspected suicide attack in Islamabad
A senior police official said it appears to have been a suicide bomb attack.
"The explosion happened as a car reached the barricade outside the hotel," he said.
Flames have engulfed the front of the hotel and as many as 200 people are reportedly still trapped inside.
Witnesses reported that ceilings in the hotel lobby and dining area had collapsed.
Dozens of cars parked on the street outside have also been destroyed.
Hotel employee Mohammad Sultan, who was in the lobby when the blast happened, said: "I don't understand what it was, but it was like the world is finished."
The hotel is a favourite place for foreigners to stay and is heavily guarded.
Sky producer Chaide O'Shea, who is at the scene, said: "Security at the hotel is a high priority and it's because of that why so many foreigners are attracted to it.
"There are reports of dozens of people being killed and the number of injured is also rising. At the moment there's no initial word of the nationalities of those hurt."
No one has yet claimed responsibility for the attack and its exact cause is unclear.
The attack comes just days after Pakistan's new president, Asif Ali Zardari, pledged that Pakistan would not tolerate any infringement of its territory in the name of the fight against militants.
In recent weeks Pakistan has faced a wave of militant violence following army-led offensives against insurgents in its border regions.
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