At least one person was killed and 20 injured when an underground pipe carrying steam at high pressure burst in mid-town Manhattan triggering panic among hundreds of people present at the scene.

People ran from the scene in panic, dropping their handbags, brief cases and some without shoes apparently believing it might a terrorist act. But authorities moved quickly to assure that it was not a terrorist attack but a pipe burst, something Manhattan had seen earlier too.

The pipe exploded during the evening rush-hour on Wednesday with a huge roar, sending a geyser of scalding steam, water, mud and debris high above the 77-storey Chrysler building, one of the tallest structure in the city. One person was killed and 20 injured, two of them seriously, in the incident.

"There is no reason to believe whatsoever that this anything other than a failure of infrastructure," Mayor Michael Bloomberg told reporters at the accident site within an hour of workers shutting off the steam.

A 24-inch steam pipe installed in 1924 burst with explosion most likely to have be caused by introduction of cold water in the pipe, he said.

Millions of pounds of steam are pumped through underground pipes in the city every hour, heating or cooling thousands of buildings.

Thousands of people from nearby building evacuated, police closed more than 2 square kilometres area, underground local train services were suspended on several route and bus services disrupted at the height of evening rush hour.

Commuters ran out of the multi-level Grand Central train station, used by tens of thousands every day, as workers shouted instructions that all leave the terminal.