The fatal blast occurred just minutes after a car exploded on another nearby street sending two people to hospital.
Roughly ten minutes before the explosions, Swedish news agency TT received an email telling Muslims in Sweden and Europe it was "time to take action".
Sveriges Television (SVT) reported that both explosions, which occurred about 200 metres from one another, were part of a suicide attack in the Swedish capital.
Writing from his Twitter account shortly after midnight on Saturday night, Swedish Foreign Minister Carl Bildt referred to the incident as a "terrorist attack".
"Most worrying attempt at terrorist attack in crowded part of central Stockholm," wrote Bildt.
"Failed -- but could have been truly catastrophic..." he added.
Bildt's comments, sent from his Twitter account, effectively confirmed earlier reports in the Swedish media that the two almost simultaneous explosions had been an attack.
The first blast in the car left two passers-by in need of hospital treatment for minor injuries, said emergency services spokesperson Bengt Norberg.
A second alert was received two minutes later and one person was found dead at the scene of the second blast which took place in the street, he added.
"I cannot confirm that the death is linked to the explosion of the car but I cannot deny it either," police spokeswoman Petra Sjolandero told AFP.
She added that the car caught fire "following a series of explosions which could have been from gas canisters."
Police later told the TT news agency that the car explosion was caused by cannisters containing liquefied petroleum gas.
According to the TT news agency, police are operating under the assumption that the man who died wasn’t injured in a car explosion but instead blew himself up.
The first emergency calls came in at 4.52pm on Saturday, with police fielding dozens of calls about a car exploding at the intersection of Drottninggatan and Olof Palmes gata in central Stockholm.
“We’ve received at least 50 calls to 112,” said Norberg told TT, referring to Sweden’s emergency telephone number.
Later, a man was found dead at the intersection of Bryggargatan and Drottninggatan.
A man who arrived on the scene before the police arrived told the Dagens Nyheter (DN) newspaper that the dead man had a large wound in his abdomen.
“It looked like the man was carrying something that exploded on his stomach. He didn’t have any injuries to his face or his body and the stores nearby weren’t damaged. All the windows were whole,” the witness told DN.
The body was still lying in the street at 11pm on Saturday evening as police continued their investigation.
"They are still at the scene working and at this point we have nothing new to report," police spokesperson Kjell Lindgren told TT.
A bomb squad from the Stockholm police was examining the scene following the explosion.
According to the Stockholm police, a bag was found nearby the man who died in the second explosion.
Police refused to divulge details about the bag's contents. However, several Swedish media outlets report that the bag was filled with nails.
Members of the Stockholm police force met with counterparts from Swedish security service Säpo for several hours on Saturday evening and were unavailable for comment.
Approximately ten minutes before the explosions occurred, Swedish news agency TT received an email, also addressed to Säpo, in which a reached out to “Sweden and the Swedish people”.
He cites Sweden’s silence surrounding the cartoons by Swedish Lars Vilks which portray the prophet Mohammed as a dog, the Swedish troops in Afghanistan, saying in audio files attached to the email that “now your children, daughters and sisters die like our brothers’ and sisters’ children die”.
“Our actions will speak for themselves. As long as you don’t stop your war against Islam and degrading the prophet and your stupid support of that pig Vilks,” the man said.
The man also urges all Muslims in Sweden to “stop sucking up to and degrading”. He concludes the message with yet another call to “all the mujahedeen in Europe and Sweden”.
“Now it’s time to act, don’t wait any longer. Fear no one, don’t fear prison, don’t fear death.”
Säpo hasn’t commented to TT on the contents of the message or confirmed that it also received the email, which included audio files in both Swedish and Arabic.
There is also no confirmation that the message has anything to do with the explosions.
However, Säpo later confirmed for the Aftonbladet newspaper that the agency had received the same email that was sent to TT.
“It came into our registry. It was handed over to our case officer for review,” Säpo spokesperson Michael Gunnarsson told the newspaper.
The audio files attached to the email don’t specify if the man belonged to any organisation. However, he does say he has been to the Middle East and that he asked his family for forgiveness for lying to them.
“I never went to the Middle East to work or earn money, I went there for jihad,” said the man.
Speaking with SVT shortly before 1am on Sunday morning, Stockholm police spokesperson Ulf Göranzon said police were still not ready to confirm that the man found dead following Saturday's blast had killed himself in a suicide attack.
"We haven't been able to ascertain how this person died, and therefore I have no comment on that," he said.
In addition to investigating how the man died, police are also working on establishing his identity, Göranzon added.
He also refused to comment on the contents of the bag found next to the man, nor would he confirm whether or not the two explosions were related.
However, Göranzon admitted that police were "thinking along those lines" in part because the explosions took place so close to one another.