A large explosion rocked the centre of Stockholm yesterday.

A natural gas-powered bus didn't have any passengers on-board when it caught fire from an explosion in Sweden's capital, near the government district.

Stockholm police said there were no signs it was terror-related.

A bus exploded in Stockholm's city centre with the driver rushed to hospital with severe burns (AAP)

The city's police department tweeted that the bus driver was rushed to the hospital with severe burns but no one else was known to have been injured.

"There were no passengers in the bus. I do not know how it is with the driver, but I have no information that someone is injured," Police press officer Carina Skagerlind said, according to Aftonbladet .

"I heard a big bang first and then several smaller ones. It seemed like a scaffolding collapsed," one witness told the publication.

It's understood a gas cylinder on top of the bus caught fire after bumping into the top of the tunnel (AAP)

Rescue worker Asa Skold told the Swedish newspaper the bus appeared to have collided with barriers at the top of the shallow tunnel's entrance, causing a gas tank on the vehicle's roof to explode.

The newspaper said the out-of-service bus was on its way to a bus depot.

Stockholm fire and rescue officials were called to the Klara Tunnel in central Stockholm at about 11:25 a.m. local time.

Large black plumes of smoke were visible across the top of the Swedish capital (AAP)

The department said the incident was being investigated as a traffic accident.

Shocked locals have shared video and photos on social media showing large plumes of black smoke rising high over the buildings.

Authorities warned of the flow on traffic effects with two tunnels closed as a result of the incident (AAP)