A massive explosion gutted Mexico's biggest fireworks market, killing at least 29 people and injuring 70, authorities said.

The conflagration, in the Mexico City suburb of Tultepec, set off a quick-fire series of multicolored blasts and sent a vast cloud of smoke billowing over the capital city.

The market had been packed with customers buying pyrotechnics for traditional end-of-year festivities. Christmas and New Year's parties in many Latin American countries often wrap up with clattering firework blasts.

"You just heard the blast. And everything started to be on fire. In fact, people came running out on fire," said Walter Garduno, who witnessed the tragedy.

"People were running out on fire, alight ... children," said Garduno, before trailing off.

From a few kilometers away, the multiple explosions that started on Tuesday afternoon, at 2:50 pm Mexico time, almost looked festive, alight in blue, red and white. They were anything but.

"We recovered 26 bodies at the scene of the incident. And three more have died in the hospital, for a total of 29 dead," Mexico state's governor Eruviel Avila said.

Federal police said on Twitter that 70 people were hurt and were transported to emergency rooms.

Fire crews struggled for three hours before bringing the blaze under control.