World leaders condemned the co-ordinated blasts as an attack on democracy coming just three days before Sunday's generals elections, and urged a joint stand to fight against terrorism.
Interior Minister Angel Acebes said 13 bombs had been placed in stations and trains around Madrid, of which 10 had gone off within minutes of each other, adding there was "no doubt" the separatist Basque group ETA, which is on the US list of banned terror organisations, was behind the attack.
But the leader of the banned Basque Batasuna political party denied the charge and condemned the attacks, which judicial sources at the scene said killed more than 186 people and injured more than 1,000.
Instead Batasuna party leader Arnaldo Otegi highlighted Spain's role in the US-led occupation of Iraq which has already drawn warnings of revenge attacks from the al Qaeda terror network and blamed "Arab resistance".
Commuters faced scenes of carnage with bodies strewn across tracks and in the wreckage of the four trains targeted by the blasts at the Atocha station in central Madrid, as well as the suburban Santa Eugenia and Pozo stations.
Three more bombs were detonated in controlled explosions by the Spanish authorities, Acebes said. He gave an earlier toll of more than 173 dead and 600 wounded.
Spanish Prime Minister Jose Maria Aznar, who himself escaped an ETA attempt on his life in 1995, just months before he became premier, vowed to hunt down those responsible for the blasts.
"We will not back down in the face of terrorist killings. The perpetrators will be tried and convicted," he said in a national address, without referring directly to ETA.
"Terrorism is not blind. These terrorists wanted to cause as much damage as possible. It is a massacre. They have killed many people simply for being Spanish," said Aznar.
"There can be no negotiation with these murderers. We will only stop these attacks by taking a hard line," he added.
Acebes insisted the attacks had been carried out by the armed group which has led a 36-year campaign for a separatist Basque homeland in which over 800 people have died on both sides.
"ETA were looking to carry out a massacre" in Madrid "and they have achieved their objective," Acebes said.
Spanish anti-terrorist sources said all 13 bombs were made of dynamite, of a type habitually used by ETA.
But Otegi said he refused to believe ETA (Euskadi Ta Askatasuna, Basque Homeland and Liberty) was involved saying he believed extremists from an "Arab resistance" were to blame.
"ETA has always issued a warning whenever it left a bomb to explode" he said, recalling that "Spain maintains occupation forces in Iraq and we should not forget that it had a responsibility for the war in Iraq."
The blasts occurred within minutes of each other starting from 7:30 am (0630 GMT) as morning commuters arrived at the three stations.
"The coach behind mine was packed with bodies. Some people were burnt in their seats," said one passenger, Antonio Villacanas at south-eastern Santa Eugenia station.
Rescue services and hospitals appealed for blood donations to cope with the flood of injured as horrified onlookers watched scenes of carnage unfolding before their eyes.
Many survivors had their clothes cut from their bodies to assist rapid treatment of their injuries. Others simply sat on the pavement, their head in their hands. Many were trembling and in tears.
"There were people like me going to school. It was a strange sensation. I can't explain the feeling, dead people all around," said one student at Atocha station.
British Prime Minister Tony Blair condemned the attack saying it highlighted the threat posed by terrorism world-wide.
"The terrible attack underlines the threat that we all continue to face from terrorism in many countries, and why we all must work together internationally to safeguard our peoples against such attacks and defeat terrorism," he said.
President George W. Bush also rang Aznar to express his horror and send "his condolences over the visciousness" of the attack, said National Security Council spokesman Sean McCormack.
Only a fortnight ago Spanish police foiled an attack believed aimed at Madrid by arresting two suspected ETA members as they headed for the capital in a pick-up truck carrying over 500 kilograms (1,100 pounds) of explosives.