The management of Arya Gurukul School, where the incident occurred, had hired the balloon seller for the annual sports day, they said.
"The man was filling the balloons with gas when suddenly the cylinder exploded this afternoon. The impact was so powerful that the victim was blown away in the blast and died on the spot," police spokesperson Gajanan Kabdule said.
At least seven children sustained injuries in the incident.
Police and fire brigade personnel rushed to the spot and the injured have been admitted to a nearby hospital, they said.
The deceased was yet to be identified, police said. Further details are awaited.