The train was made up of 51 wagons, which were thought to have been set loose by earth tremors before rolling out of control and catching fire at about 04:00 local time. The fire was almost under control when the explosion happened at about 09:35.
The head of disasters in Khorassan province, Vahid Barakchi, told the official IRNA news agency: 'Five villages were destroyed. The number of people killed in this incident is more than 200. Our rescue workers are trying to remove more than 350 injured people to hospitals in Mashhad and Neyshabour.'
Later reports put the death-toll at just under 200. 'Up to now, accurate reports say 182 people are dead and 350 injured,' Mohammad Maghdori, a deputy governor general of Khorassan province and chief of emergencies, told state TV. Several firefighters are thought to have died in the blast.
Reports say that the dead include the local governor, mayor and fire chief, while IRNA reported that the head of the city's energy department was also killed and that the director-general of the provincial railways is missing.
The tragedy comes as Iran prepares itself for parliamentary elections which are due to take place on 20 February.
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