Several hundred thousand people had gathered on the banks of the Danube River to watch a fireworks display laid on for Hungary's national day.
Then torrential rains and gale force winds of up to 100 kilometres per hour uprooted trees and sent mobile vendors' tents flying as thousands ran for cover to escape the downpour.
The fire department said at least two died when a large tree fell on a crowd of spectators.
"A large tree fell on the crowd and two people died, two are in critical condition, two others suffered serious injuries while three others have lighter injuries," Peter Molnar, a spokesman for the fire department said.
Ships reportedly collided on the Danube River, throwing several people overboard in the storm with four people reportedly rescued from the river, while one was missing.
Others were reportedly trapped under uprooted trees amid scenes of chaos in the Hungarian capital.
"We have an emergency, people were reported injured and there are ambulance and fire truck sirens wailing all over the city," Molnar said.
The roof of a stand set aside for the media also crashed down, injuring several people.
Hungarian media reported that falling trees and tiles blown from the rooftops of buildings injured several people, but no figures were immediately available.
The meteorological service said it had warned organisers of the fireworks display that that a violent storm was approaching the capital, but the event went ahead nonetheless.