There were no reports of any casualties and the fire is under control now.
According to reports, continuous loud explosions were heard at the army base.
"The fire broke out in shed number 16 (store house) of the depot at 1.30 am. Within five minutes, the entire fire fighting machinery of the Army was activated to battle the blaze," Wing Commander M Upasani of Eastern Command was quoted by news agency as saying.
"The fire was brought under control at around 3.30 am but the shed was totally destroyed," he said.
The Panagarh Army weapons' depot is one of the biggest in eastern India. Both the Indian Army and Air Force have their establishment here.