The incident took place at about 4pm in the turbine hall of the former coal-fired Didcot A plant in south Oxfordshire, which closed in 2013 and was in the process of being demolished.
It is thought to have been caused by work to to prepare two boilers for demolition. A spokesman for RWE npower said workers would have had to weaken the building prior to its demolition, which was scheduled for next month.
Pictures from the scene showed a significant chunk of a building in the defunct Didcot A site has collapsed, with a large amount of debris on the ground.
David Cooke, whose company Thames Cryogenics has a building overlooking the power station said: "Our building shook and as we looked out of the window, the end of the main turbine hall collapsed in a huge pile of dust.
"It totally obscured the towers and must have drifted across the roads and main rail line. What's left looks a tangled mess.
"The dust was hanging over the area for five to 10 minutes.”
Didcot A opened in 1970 as a coal-fired power station and was later converted so it could also generate power from natural gas.
It ceased generation in March 2013 and hundreds gathered to watch when three of its enormous cooling towers were blown up in July 2014 after dominating the town's skyline for more than four decades.
The total demolition was planned to be completed by the end of the year.
A GMB union official said: "We understand that workers were preparing two boilers for demolition in the coming weeks. This led to the collapse of a building."
Casualties from the scene were taken to Oxford’s John Radcliffe Hospital.
The fire service advised people in the area to stay indoors, saying that while dust from the collapse had covered "a considerable area" there were no hazardous materials in the building.
Fire engines from Oxfordshire were at the scene, along with specialist search units and further teams from Thames Valley Police and South Central Ambulance Service, including six ambulances and two air ambulance helicopters.
The collapse comes just over a year after a major fire struck a cooling tower at the Didcot B power station in October 2014.
It began in a cooling tower and later spread to others, with one of the modules used to generate electricity put out of action for a week.
The blaze affected 50 percent of the station output - supplying a million homes - but no one was injured in that incident.
Local MP Ed Vaizey told BBC News: "There is a coal power station there and there is a gas-fired power station there, and the coal power station has been decommissioned.
"There are six cooling towers, they are the symbol of Didcot, and three of those towers were brought down in a properly-controlled explosion a year ago and the next three are due to be brought down soon.
"Obviously there are large buildings also to be taken down by professional contractors. I don't know if this is related to that."
He said on Twitter that he was “praying for workers and their families”.