Aliso Viejo is about 50 miles southeast of Los Angeles. It blew siding off the walls, exposing insulation and framing and shattering windows at the two-story building.
Investigators believe the Tuesday blast, which happened in Orange County, may have come from a package, according to the Associated Press. Investigators said they hadn't yet located an explosive device and were searching through debris.
A daycare and preschool are near the site of the explosion, but authorities say all of the children are safe.
Police investigators and FBI agents are studying the causes of the explosion, and they assure that there is no lingering threat to the community.
Carrie Braun, an Orange County Sheriff's Department spokeswoman, said authorities were working to determine if the explosion was an accident or an intentional act, the newspaper reported.
Firefighters put out a small fire and found one woman dead inside the building, the authorities said.
A third person suffered smoke inhalation, fire officials said.
There's no "initial indication" of terrorism right now, Mike Gifford, spokesperson for Federal Bureau of Investigation in Los Angeles, said.
Officials reportedly said the person who died is a woman and was near to the source of the explosion, The Orange County Register reported.
Mary McWilliams told the Orange County Register that she arrived for an appointment to find smoke surrounding the area and vehicle alarms going off. Surrounding buildings have also been evacuated.
One woman, who had skin peeling on her arm from burns, said, "Take care of my mother", McWilliams said.
"... They weren't on fire, they were helping each other across the street, walking very slowly and a lot of shock, shaking, just full of ash all over their face, eyes bloodshot, just blood all over", the woman said. The other woman was burned and her head was bleeding.
Braun said the two survivors had critical injuries "that were consistent with an explosion, but not necessarily consistent with a bomb".