The blast happened just after 3 pm on Friday at the Applegreen service station on the outskirts of Creeslough, where a search operation is continuing with the help of sniffer dogs, APA reports citing Sky News.
Photos showed a number of cars damaged by debris, with what appears to be an apartment block behind the forecourt having been largely destroyed.
Search efforts continued for others feared missing, and the major emergency response operation, involving first responders from both sides of the Irish border, was expected to continue through the night.
Among those gathered at the scene as sniffer dogs worked through the rubble were relatives of people believed to have been in the building at the time.
Irish premier Micheal Martin said it was the "darkest of days" for Donegal and Ireland.
"My thoughts and prayers are today with those who have lost their lives and those injured in the devastating explosion in Creeslough," said the Taoiseach.
"I wish to express my deepest sympathies to their family and friends, and to the entire community of Creeslough, on this darkest of days for Donegal and the entire country.
"People across this island will be numbed by the same sense of shock and utter devastation as the people of Creeslough at this tragic loss of life.
"I would like to thank all the members of the emergency services, from across the North-West and Northern Ireland, who responded so quickly to the scene, and who are working throughout the night in extremely traumatic circumstances."