A funicular has derailed in central Lisbon, smashing into a building and killing at least three people.

Authorities said about 20 people were injured and several people were trapped inside the Elevador da Gloria in the Portuguese capital.

Police told CNN Portugal three people had died and paramedics said three seriously injured people were taken to hospital.

Live footage on local TV showed the emblematic bright yellow carriage completely destroyed, surrounded by firefighters.

Videos shot by bystanders showed a huge cloud of dust and people running towards the accident.

Several injured people were carried away from the crash, which took place on Wednesday afternoon (early Thursday AEST) in part of the town that's extremely popular with tourists.

Portuguese President Marcelo Rebelo de Sousa said he deeply regretted the accident and offered his sympathy and solidarity with those affected by the"tragedy".

Lisbon Mayor Carlos Moedas was at the site of the crash. 

The funicular links Restauradores, a zone with multiple hotels, a major railway station and many shops and restaurants, with Bairro Alto, the city's busiest neighbourhood for nightlife.

Hilly Lisbon is home to several funiculars, along with its renowned trams, which have a similar design and are popular with tourists, along with the locals who use them to get around the city.

Carris, which operates much of the city's public transport network, told CNN Portugal said that all its resources were activated to respond and its"priority is to monitor the situation".