It happened shortly after 9 p.m. at the Astoria East and North Queens Con Edison plant on 20th Avenue and 32nd Street in Astoria.
New Yorkers reported seeing massive blue lights in the city following the explosion and took to social media to share photos and videos.
Fire officials said they were fielding numerous calls for reports of explosions in the Long Island City and Astoria areas.
The NYPD said a fire caused by the explosion was placed under control.
According to Con Ed, the transformer explosion was caused by a transmission dip at its Astoria substation. Mayor Bill de Blasio's office said the blue light was caused by an electrical surge at the substation.
The mayor's office said there have been scattered power outages, including at LaGuardia Airport. There was a total operations halt at the airport for about a half hour before flights resumed, but travelers were advised to expect delays.
Transformer explosion disrupts operations at LaGuardia
The airport was running on a backup generator but a Con Ed spokesman said power was restored late Thursday night.
There are no indications of local air quality issues but health and environmental officials will continue to monitor the situation, a spokesman for the mayor said.
No customer outages were reported. Con Ed said all power lines serving the area were in service and the system was stable.
Con Ed investigating transformer explosion
The NYPD said there have been no injuries.