"The police force headquarters has been bombed, everywhere is bombed," deputy police spokesman Yemi Ajayi told AFP.
An emergency official said a suspected suicide bomber had died in the blast.
A Red Cross worker told Reuters other bodies were being evacuated from the scene, from where a large plume of smoke can been seen rising. No-one has claimed responsibility for the attack.
However, Islamist group Boko Haram has recently been targeting police and government officials.
The BBC's Jonah Fisher in Lagos says for the Nigerian authorities, the attack is an embarrassing strike at the very heart of their security establishment.
Officials say the explosion took place in the car park of the police headquarters.
"A suspected suicide bomber died in the incident. Many vehicles were destroyed," Yushau Shuaib, a spokesman for the National Emergency Management Agency told the AFP news agency.
Residents say the explosion was heard across the city.
Inauguration bombing
"My windows were shaking and I heard the loud noise. I saw smoke coming up," Reuters news agency quotes one witness as telling a local television station.
An eyewitness told the BBC Hausa Service that he heard two explosions and saw more than 30 dead bodies and about 40 vehicles destroyed.
A bus commuter who saw the blast told the BBC's Focus on Africa programme: "All of a sudden there was this loud explosion. Everybody was scared and people began to run around."
He said police and Red Cross officials had rushed to the scene, and had moved people away from the area.
"We are evacuating the dead bodies, it is too early for us to judge how many. Our priority is to treat the living casualties right now," a Red Cross spokesman told Reuters.
Most of Boko Haram's attacks have been in the northern city of Maiduguri.
But the group said it was behind a series of bombings that took place hours after President Goodluck Jonathan's inauguration last month.
On Tuesday, Nigeria's police chief promised to decisively deal with the group by sending more troops and equipment to the north, declaring they would be finished within a few months.
The group accuses Nigeria's government of being corrupted by Western ideas and wants to overthrow the state and impose Islamic law on the country.
It has killed dozens of people, mostly shot by gunmen riding motorbikes, in Maiduguri, the capital of Borno state.
Last year, officials blamed two explosions in Abuja during celebrations to mark the 50th anniversary of Nigeria's independence on militants from the oil-rich Niger Delta around Port Harcourt.
TTowonubi
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