The blast, which killed a man and a 14 year-old child, occurred early in the morning on the ground floor of a 12-storey residential building. It completely destroyed the staircase and ceilings on the first three stories.
A total of 21 rescuers are working at the scene.
City Mayor Vladimir Afanasenkov told reporters that 11 people had been given medical aid, and that one was being treated in hospital in Sochi, which will host 2014 Olympic Games.
Police said liquefied petroleum gas cylinders may have detonated in the building.
"Residents of the building were secretly using liquefied gas," a spokesman said. Several cylinders have been found in the debris, he added.
Forensic experts are working at the scene to establish the cause of the explosion.
