State media stated that the blast occurred because of the government shelling striking a house used as a bomb factory by "armed terrorist groups.
Britain-based Syrian Observatory Human Rights organization has urged the UN observers to inspect the area.
The city of Hama has remained as a major revolt area since the 13 month uprising against President Bashar al-Assad.
President Bashar Assad's regime, facing a 13-month-old uprising, has restricted access for journalists and other outside witnesses.
As the violence in Syria continues despite U.N.-led efforts to implement a cease-fire, the international community has become increasingly impatient with the Assad regime. On Wednesday, France raised the prospect of military intervention in Syria, saying the U.N. should consider harsher measures if a peace plan by Annan fails.
Amateur videos said to be of Wednesday's incident in Hama showed a large cloud of white and yellow smoke rising from a neighborhood surrounded by green fields. In a later video, dozens of people are searching the debris, including huge chunks of cement and broken cinderblocks. Another clip shows the bloodied body of a little girl being carried through a crowd of wailing men.
The Local Coordination Committees, a network of activists, said the destruction was caused by intense shelling from government tanks.
French Foreign Minister Alain Juppe said Wednesday that France had discussed invoking Chapter 7 of the U.N. Charter, which can be enforced militarily, with other world powers. U.S. Secretary of State Hillary Clinton said last week the United Nations should move toward such a step to allow for measures like travel and financial sanctions and an arms embargo. She didn't mention military action. For more than a year, the U.S. has opposed the further militarization of the situation.
Any such move, however, would likely be blocked by Russia and China, which have twice used their vetoes as permanent Council members to protect Syria from condemnation and remain opposed to military intervention. Western powers, too, don't appear interested in sending forces to another Middle East nation in turmoil.
Arab countries are divided on their response to the Syrian crisis, with Gulf countries led by Qatar and Saudi Arabia in favor of arming the opposition and others like Egypt, Iraq and Sudan preferring a diplomatic solution.
For now, the international community remains united in support of Annan's plan, which calls for a cease-fire, to be followed by talks between the regime and the opposition on a political solution to the conflict that the U.N. says has killed more than 9,000 people.
That plan, however, has been troubled from the start. Syria has failed to enact key parts of the plan, like withdrawing its forces from cities, and its troops have attacked opposition areas, killing scores of civilians since the truce was to begin on April 12. Rebel fighters, too, have attacked military checkpoints and convoys. (AP)