The unmanned Titan 4A rocket, built by Lockheed Martin, lifted off at 7.30am carrying the satellite for the US National Reconnaissance Office (NRO). There have been no reports of injuries and the cause of the explosion is not known.
Television images broadcast showed the rocket was over the ocean when it exploded. "Oh no," the commentator said as the rocket blew up 40 seconds after lift-off. "At this time it appears we have had a major malfunction of the vehicle. We have had an explosion."
There were two or three distinct loud bangs, setting off car alarms and burglar alarms in nearby Cocoa Beach.
Space analysts said they believed the Titan was carrying an eavesdropping satellite which would have listened in on military and government communications in global hotspots such as the Middle East, India and Pakistan, and China. Together, the rocket and the satellite, reportedly code-named Vortex, were believed to have cost about $1bn (pounds 620,000).
The 20-story rocket was laden with nearly 500,000lbs of highly toxic fuel. But the USAF said there was no danger to nearby residents, as fumes blew out to sea and dispersed.
Under launch rules, the air force does not launch Titans if there is any chance that propellants could be blown towards populated areas in the event of an accident. A similar satellite was launched in May, also on a Titan rocket.
The last Titan 4 rocket explosion was at Vandenberg air force base in California in August 1993. The Titan 4A that blew up yesterday was the last of that model scheduled for launch. The air force last year introduced an improved version of the rocket, also made by Lockheed Martin.