The Russian Proton-K booster rocket veered out of control nearly four minutes after its launch, the Kazakh Emergencies Ministry said.
A ministry spokesman said the rocket had crashed about 25km (16 miles) north-east of the town of Atasu, and nearly 300km (180 miles) south of the regional centre Karaganda.
It is not known whether rocket fragments caused any damage on the ground.
A government commission has been set up to investigate the causes of the accident.
Engine failure
Prime Minister Kasymzhomart Tokayev said in a statement: "We will take the decision to ban launches from the Baikonur cosmodrome until the commission clarifies the circumstances surrounding the incident."
Officials at the Khrunichev company, which makes the Proton, told Interfax news agency that ground controllers had lost contact with the rocket after its engines failed.
Representatives from the Khrunichev Space Centre have already flown from Moscow to Karaganda.
The Proton was carrying a Russian-made Express A1 communications satellite.
The accident mirrored the failed launch of another Proton in July, which prompted Kazakhstan to suspend all Russian launches from the cosmodrome.
Kazakhstan said the crash had caused significant environmental damage.
The ban was lifted in late August after Russia started paying off back rent for Baikonur, along with $270,000 in compensation for the crash.
The Kazakhs said they wanted a greater share of revenues from future launches.
Baikonur is the main launch site for the Russian space programme and was inherited by Kazakhstan after the break-up of the Soviet Union. Moscow rents it for $115m a year.
Country profiles
Delay to Mir launch expected
(14 Jul 99 | Europe)
Proton worry for space station
(07 Jul 99 | Sci/Tech)
Russian Space Agency
Kazakhstan Presidency
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