Several fire trucks rushed to the scene after the blast was reported near one of the gates of the Red Fort metro station, the city's fire services said on Monday.
The cause of the explosion remained unclear.
The owner of a car involved in an explosion has been arrested, broadcaster NDTV reported on Monday.
Om Prakash Gupta, an eyewitness who lives close to the scene, said he was at home when he heard a loud explosion.
"I rushed out with my children and saw several vehicles on fire, body parts all over," he told The Associated Press.
He said he saw one body on the windscreen of a car.
Sanjay Tyagi, a spokesman for the city's police force, told The Associated Press that at least eight people were killed, and several others were injured.
"We are investigating the cause of the blast," he said.
Home Minister Amit Shah told local media that a Hyundai i20 car exploded near a traffic signal close to the Red Fort.
He said CCTV footage from cameras in the area will form part of the investigation.
"We are exploring all possibilities and will conduct a thorough investigation, taking all possibilities into account," Shah said
Prime Minister Narendra Modi said authorities were reviewing the situation.
"Condolences to those who have lost their loved ones in the blast in Delhi earlier this evening. May the injured recover at the earliest," he wrote on X.
Formerly an imperial palace, the 17th-century Red Fort is a major tourist attraction in New Delhi.
Located six kilometres from the Parliament, it is where Indian prime ministers deliver their annual independence day speeches on August 15.
The investigation is being conducted by the National Investigation Agency, India's federal terror investigating agency, and other agencies.
with Reuters
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