More than 20 people are being treated in hospital with burns and other injuries after the incident in the village of Hitrino, local media say.
The authorities ordered an evacuation as firefighters battled the blaze.
At least 20 buildings were damaged in the derailment and explosion, spokesperson Nikolay Nikolov told Bulgaria's Nova television.
Two tanks hit an electricity line and exploded when the train derailed near the village station at about 05:30 local time (03:30 GMT), according to several reports.
"Two blasts have caused a serious fire and ruined at least 20 buildings," Interior Ministry Chief Secretary Georgi Kostov told Reuters news agency.
"There are many people injured... many with burns."
Hitrino, a town of around 800 people, is located in Bulgaria's north-eastern Shumen province, about 60 miles (100km) from the Black Sea.
Bulgarian Prime Minister Boiko Borisov said he was travelling to the village.
In a post on social media, he said the regional hospital needed blood supplies to cope with the causalities, and appealed to people in the region to donate blood.
Transport Minister Ivalyo Moskovski also said he was travelling to the village. In a brief statement, he said he had ordered both the head of the railway accident investigation task force and a representative of the rail infrastructure company to attend the scene.
A train carrying liquid petroleum gas has derailed and exploded in Bulgaria, killing at least four people.