The Soyuz-U rocket blew up 29 seconds after take-off, Russia's emergencies ministry spokesman said on Wednesday.
The explosion sent burning debris from the rocket on to the launch pad and surrounding forest at the Plesetsk space centre, about 1,200 kilometres (745 miles) north-west of Moscow.
The rocket was carrying a Photon-M satellite, which had been due to make a 15-day voyage around the Earth carrying out scientific experiments for European Space Agency member states and other countries.
The satellite was not connected with the orbiting International Space Station (ISS), manned at present by two Russians and one American.
But an official at Russia's mission control, which monitors the $90bn ISS programme, said the accident could raise a question mark over the next planned flight to the station.
"Serious conclusions will have to be drawn, as a modified version of this same rocket is due to take a group of cosmonauts to the ISS shortly," he said.
The cosmonauts - two Russian and a Belgian - are scheduled to blast off for the ISS on 28 October on a brief mission to fit a new rescue capsule to the station.
"There are no plans as yet to postpone the flight," Sergei Gorbunov, spokesman for the Russian space agency, said.
Setback
The Plesetsk facility, which is operated by the Russian military's space forces, is the launch site for many of Russia's unmanned spacecraft.
More than 1,500 rockets have been successfully launched from the Arctic cosmodrome, the northernmost facility of its kind in the world.
The main launch site for the Russian space programme is the Baikonur cosmodrome in Kazakhstan, which Moscow leases from its neighbour.
Russia has been trying to shift launches to its own Plesetsk cosmodrome. This was the eighth launch from Plesetsk this year.
Russian officials say the Soyuz-U has a good safety record, and had not been involved in an accident for 11 years.
Satellite launches are an important source of revenue for Russia, but there have been failures.
Russia lost six communications satellites in December 2000 when a booster rocket carrying them to space from Plesetsk failed shortly after launch.
An inquiry has started into what went wrong this time. But engine failure is almost certainly to blame, says the BBC's Jonathan Charles in Moscow.