Twenty-five people were killed and 80 were wounded when a powerful explosion -- believed to be caused by a car bomb -- ripped through an Afghan construction firm Friday.

A military commander at the scene, Mohammad Sultan, said the blast was caused by a car bomb. Earlier, the deputy governor of Nangarhar province, Mohammed Assef Qazi Zada, said explosives were stored at the site and it may have been an accident, the Afghan Islamic Press agency reported.

The local military commander, Hazrat Ali, also suggested it was a car bombing.

The thunderous blast damaged 50 surrounding homes, some as far as 500 yards away, said Ali, who initially reported about a dozen people killed. But he said it was a "tremendous explosion" and "the number of dead will probably rise because of people dying in the hospital."

Seven hours after the 12:30 p.m. blast, national television said the death toll stood at 25.

The explosion in western Jalalabad, 70 miles east of Kabul, the capital, occurred at a maintenance facility of the Afghan Construction and Logistics Unit.

The explosion occurred just 200 yards from a hydroelectric dam, and damaged the dam's electrical works, along with the power system for nearby Jalalabad University and the surrounding district, police chief Haji Ajib Shah said.

The blast came after several incidents in recent weeks -- including the assassination of a vice president and the discovery of a would-be car bomber in Kabul -- put Afghan security forces on alert against possible terror attacks by resurgent Taliban or Al Qaeda forces.

He said three staff members, including the second-ranking officer of the organization, had been taken into custody for questioning about the blast.

The organization, known as ACLU, was founded as a non-governmental organization with U.S. funding to do road-building and other construction, but U.S. support was withdrawn about a decade ago. The unit has since continued operations as a private concern fulfilling contracts from international organizations.

During the Taliban's 1996-2001 government, the founder of the organization, known as Engineer Karim, was jailed when he refused to take a Taliban representative onto his advisory board.

Friday's explosion struck in a city and province where tensions run high eight months after a U.S.-led military campaign brought down Afghanistan's Taliban government.

The longtime Nangarhar governor, Haji Abdul Qadir, a national vice president, was slain on July 6 in a still-unexplained assassination in Kabul. Jalalabad residents have staged regular protests since then, demanding the arrest of his killers. Suspicions point in many directions in fractious post-Taliban Afghanistan.

Three months earlier, the new Afghan defense minister, Mohammad Fahim, escaped injury when a bomb exploded near his convoy in Jalalabad. Five people were killed in that blast.

Nangarhar is suspected of harboring fugitive Taliban figures and holdouts of the Al Qaeda terrorist network, who could easily cross to and from the poorly controlled tribal lands of neighboring Pakistan. The province is also an important opium-production and smuggling area.

The Associated Press contributed to this report.