The apartment building in Neutral Bay erupted into flames before dawn on Sunday.
Concerned resident Wendy Clarke said the explosion was so powerful it rocked the foundations of the building.
“It wasn’t just an explosion, it was like a bomb,” Ms Clarke said.
Windows at an adjacent apartment block were blown out and a bus stop was ripped from the ground and sent flying down the street.
A man was seen caught on fire running from the building, much to the shock and distress of residents including John Harsem.
“I saw a poor guy with arms on fire running, essentially running and squealing into the middle of the street,” he said.
Resident and off-duty firefighter Troy Redwood was one of the first on scene. He helped the injured man.
He described the man, 42, as being in a “pretty bad way”. The man remains in a critical condition under police guard at Royal North Shore Hospital, 7 News understands.
His charred shoes and clothes could be seen laying by the roadside.
Fire crews raced to rescue about 80 residents in the building with many trapped.
“We had numerous people at windows and balconies calling out for help who were trapped,” Fire and Rescue NSW Inspector Kernin Lambert said.
“As a result of their (firefighters’) very, very professional efforts a large number of lives have been saved here.”
Residents are not back in the building yet but have been allowed to collect belongings.
It is not known what caused the fire.