The explosion occurred in the afternoon in this specialised market which traditionally welcomes many visitors as Christmas approaches.
The images displayed on the social networks show an impressive series of multicoloured explosions followed by an important release of smoke.
"The market has completely disappeared," said National Civil Protection Officer Luis Felipe Puente on Televisa, who said several of the injured were "in a serious condition."
"My condolences to the families of those who have just lost their lives in this accident and my wishes for a speedy recovery for the wounded," Mexican President Enrique Pena Nieto wrote on his Twitter account.
After three hours of effort, the firefighters managed in the late afternoon to control the fire triggered by the explosion, which also damaged housing and vehicles located nearby.
"At the scene of the incident, we recovered 26 bodies" without life, told the press the prosecutor of the State of Mexico, Alejandro Gomez.
Military personnel were deployed to assist relief efforts to evacuate victims to hospitals using ambulances and helicopters.
"We started hearing detonations, it was thought that it came from a neighbouring workshop of manufacture of pyrotechnic products", told AFP a resident of the district, Alejandra Pretel. She then realised that the explosion came from the market nearby.
"My neighbours told me that the ground was trembling, but I did not realise because I ran away," she said.