BBC Washington Correspondent Stephen Sackur: "Explosion could threaten future nuclear powered launches"

As the giant Titan-4 rocket broke up, Air Force officials took the decision to destroy it, showering debris into the sea.

The pieces were later being picked up by recovery teams for analysis.

The combined cost of the rocket and the satellite is believed to be about $1bn.

A witness said people in the neighbourhood panicked at the sight of the debris coming down, but no-one was injured.

The loud bangs, which could be heard miles away, set off car alarms and burglar alarms nearby.

Brigadier-General Randy Starbuck: "The debris and the toxics were moved out to sea by a wind"

Air Force officials stressed there was no danger to residents.

Fumes from the toxic rocket fuel were said to have wafted out to sea and dispersed within half an hour.

Under launch rules, the wind must be blowing out to sea in order for a Titan-4 to lift off.

It was the first time a Titan-4, the air force's largest and most powerful rocket, had failed on launch at Cape Canaveral, according an air force spokeswoman.

"Two seconds after it began to destruct, the air force sent destruct signals to break up the rocket," she said.

Debris from the doomed rocket falls into the Atlantic

The air force says that the rocket was carrying a satellite for the National Reconnaissance Office, an agency that operates US spy satellites orbiting the earth.

Space analysts said they believed it was an eavesdropping satellite that would have listened in on military and government communications in global hotspots such as the Middle East, India and Pakistan, and China.

A board will be convened to investigate the cause of the failure.