Prime Minister Jens Stoltenberg was working at home Friday and was unharmed, according to senior adviser Oivind Ostang.
The square where the bomb exploded was covered in twisted metal and shattered glass, and carpeted in documents expelled from the surrounding buildings, which house government offices and the headquarters of some of Norway's leading newspapers. Most of the windows were shattered in the 20-floor high rise where the prime minister and his administration works.
Oslo police said the explosion was caused by "one or more" bombs, but declined to speculate on who was behind the attack. They later sealed off the nearby offices of broadcaster TV 2 after discovering a suspicious package.
"So far, police cannot say anything about the scope of the damage, aside from that there's been one or several explosions," a police statement read.
An AP reporter who was in the office of Norwegian news agency NTB said the building shook from the blast and all employees evacuated as the alarm went off. Down in the street, he saw one person with a bleeding leg being led away from the area.
Public broadcaster NRK showed video of a blackened car lying on its side amid the debris.
Witness Ole Tommy Pedersen was standing at a bus stop 100 meters (yards) from the government high-rise at 3:30 p.m. (1330 GMT) when the explosion occurred.
"I saw three or four injured people being carried out of the building a few minutes later," Pedersen told AP.
The blast comes as Norway grapples with a homegrown terror plot linked to al-Qaida. Two suspects are in jail awaiting charges.
Last week, a Norwegian prosecutor filed terror charges against an Iraqi-born cleric for threatening Norwegian politicians with death if he is deported from the Scandinavian country. The indictment centered on statements that Mullah Krekar -- the founder of the Kurdish Islamist group Ansar al-Islam -- made to various news media, including American network NBC.
Terrorism has also been a concern in neighboring Denmark since an uproar over cartoons of the Prophet Muhammad six years ago. Danish authorities say they have foiled several terror plots linked to the 2005 newspaper cartoons that triggered protests in Muslim countries. Last month, a Danish appeals court on Wednesday sentenced a Somali man to 10 years in prison for breaking into the home of the cartoonist.