The local authorities said no children or teachers from the kindergarten were hurt in the incident as they were still having lessons when the explosion took place.
"The police and related departments rushed to the scene as soon as it was reported and conducted rescue and investigation work on the site", Xuzhou police said.
Police say the blast struck at 4.50pm today in Fengxian in Jiangsu province, but they have no word yet on the number of those injured or killed. Chinese state media CCTV reports that two people died at the scene while the other five died in hospital.
Attacks on kindergartens in China have happened before, usually by people who are mentally ill or who seek retaliation against employers or society.
A witness identified only by the surname Shi said the force of the blast sent people flying several feet into the air, according to the state-run Global Times. Clothing, shoes and other items were strewn on the ground beside pools of blood outside the kindergarten. A video that was apparently shot at a hospital showed adults and children receiving emergency treatment.
Yesterday's blast was the latest tragedy at a kindergarten in China in recent weeks.
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In May, 11 children were killed along with their teacher and driver, when their school bus caught flame inside a tunnel.
It later emerged that the fire had been started deliberately by the driver, who also died.
Local authorities held an early-morning press conference on Friday and said that contrary to early reports the blast did not occur while parents were picking up children after school, according to the People's Daily.
In February previous year, a knife-wielding assailant wounded 10 children in a schoolyard in the southern island province of Hainan, before committing suicide.
Most attacks in China - where gun controls are strict - are carried out by assailants using knives or homemade explosives.
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