Police Commissioner Hogan Kamara said authorities had launched an investigation into the explosion which broke out on Sunday morning in the densely populated area of Logo, one of five districts of Lungi District.
Kamara said some of the victims had been identified by relatives but that rescue efforts were continuing in the hope of finding more. He said 116 people had been killed and 165 were wounded.
The explosion in an informal oil market outside the capital was apparently caused by a fire involving inflammable products, Kamara said.
Witnesses at the market said a tank truck carrying petroleum products was filling up when the fire erupted. The truck escaped, they said.
Many of the bodies were charred beyond recognition, and wrapped in scraps of cloth, and the bodies of young men and women covered in blood lay on the ground.
Northerners are commonly used by the government to import petroleum products.
Kamara said there were no immediate explanations for the blast, which ripped off homes and roofs in the capital of Lungi, about 150 kilometers (90 miles) west of Freetown.
Distraught relatives rushed to the scene and blocked off the road with burning tires to demand information from local government officials.
“It was a very big explosion,” said Ahidu Sei, a village leader in the area.