The British Transport Police have confirmed the explosion occurred in the foyer area of the stadium, the BBC reports.
British Prime Minister Theresa May said investigations are currently underway into "what is being treated by the police as an appalling terrorist attack".
Parents have been desperately trying to locate their children after explosions rang out and thousands fled from the venue, many covered in blood according to witness reports.
While the cause of the blast is unknown, the BBC reports North West Counter Terrorism is treating the incident as a possible terrorist attack.
North Lanakshire woman Abby Mullen described the horror that broke out at the arena in a Facebook post.
“As we were leaving a bomb or explosion went off centimetres in front of me. People's skin and faeces where everywhere including in my hair and on my bag,” she said.
'I'm still finding bits of God knows what in my hair. You never ever expect these things to happen to you but this proves it can happen to anybody.”
She added: “That sound, the blood and those who were running around clueless with body parts and bits of skin missing will not be leaving my mind any time soon or the minds of those involved.”
Anne-Marie, who was attending the was at the concert with her 13-year-old daughter, told the BBC everybody "went into absolute panic".
"You just felt this utter shudder of the building and... there seemed to be a smog at the top of the stadium and around you," she said.
"People were dropping to the floor and thought there might be a gunman in there. Unfortunately the security were at a loss as much as anybody else and it was just each to their own.
"There were a hell of a lot of children in the building unaccompanied tonight.
"I was trying to offer my support to a number of girls who were there on their own who were hysterical. They were around my daughter's age if not younger."
News outlet Reuters is reporting that a suicide bomber is believed to be behind the explosion, although British Police have not confirmed this.
Mayor of Manchester Andy Burnham tweeted that it had been a "terrible night for our great city".
Singer Demi Lovato shared her devastation and a message for fans on Twitter.
Deaths have been confirmed by police, following a "serious incident" at Ariana Grande's concert at Manchester Arena.
Police are responding to the scene now after reports of an explosion, saying in a statement that "there are a number of fatalities confirmed."
"Details of a casualty bureau will follow as soon as possible," the statement added.
Thousands of concert-goers can be seen fleeing the scene, following the reported loud bangs. Many attendees would have been teenagers and young children.
Fans recorded the chaos on social media, with one fan writing, "Just got out of Manchester Arena after seeing Ariana perform. There was a loud bang when the lights came on & everyone ran out screaming."
Ariana Grande's rep has confirmed to Billboard that the singer hasn't been harmed from the incident.
It's still unclear what the loud noises were, with organisers telling fans there is no need to worry and to exit the arena safely.
We'll update with further details as they come to light.