Detectives have launched a criminal investigation and a bomb squad was deployed as a precaution following the blast, which blew out windows and destroyed balconies in 109 apartments.
At least 25 people suffered minor injuries in the explosion at 9am local time (7am GMT), police said.
The cause is not yet known but police spokesman Bjorn Oberg said: “As for now, we don’t have any information to believe this is terror-related.”
He added: “Many people called in about a very powerful explosion which has led to a large number of windows being blown out.
“So far we have been able to confirm that there are number of people with light injuries. We have cordoned off a large area, several blocks.”
Police said the explosion was believed to have occurred outside the five-storey building and four-storey building that were damaged.
Pontus Johansson, a 21-year-old engineer who lives nearby, said he was in the shower when he heard a loud bang.
"First I didn't think it was anything bad, then I saw the neighbour's window was broken so I left our apartment and saw the chaos outside," he added.
Pictures from the scene showed damaged buildings and rubble on the street, where a dozen ambulances were lined up.
Victims have been taken to Linkoping University, as well as other medical facilities in the city 110 miles southwest of Stockholm.
Johan Edwardsson, of Linkoping council, said many residents of the damaged buildings would not be able to return home on Friday.
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