Twenty one people have been rescued, and a further 24 people are still missing following the blast in a quiet suburb in Yevpatoriya.
"Seventeen bodies have so far been recovered," the spokesman said.
Yevpatoriya Mayor Andrei Danilenko said oxygen containers kept in the basement may have exploded.
An investigation is underway, and a criminal case has been launched.
Ukrainian Prime Minister Yulia Tymoshenko, who made a personal visit to Yevpatoriya, promised compensation to those injured and the families of the killed. She said $12,800 would be paid for every victim, while those left homeless would be given new housing later this year.
"The government made such a decision earlier in the day," Tymoshenko announced before leaving Kiev.
Ukraine's President Viktor Yushchenko also said he would visit the scene. He declared December 26 a day of mourning for those killed in the incident.
The Russian president offered Kiev on Thursday the services of the Black Sea Fleet following the blast, a Kremlin spokesman said.
"If need be suitable units from Russia's Black Sea fleet, based in Sevastopol, could help in the rescue operation," Dmitry Medvedev said in a message of condolence to his Ukrainian counterpart.
