The Starship rocket can be seen going up in flames while undergoing a ground test in a dramatic video posted online by Nasa.
No injuries have been reported following the explosion on Friday, which is unrelated to the SpaceX shuttle launch planned for Saturday in Florida.
The incident is the latest in a series of failures of the Starship heavylift rocket, which at nearly 400 feet tall is designed to take people and cargo to the moon and to Mars.
Several past versions of the rocket have also been destroyed in explosions.
SpaceX, controlled by billionaire Elon Musk, was one of three companies awarded billion-dollar contracts to develop rockets to take humans and cargo to the moon.
The news comes as SpaceX prepares a second attempt to send two astronauts to the International Space Station from the Kennedy Space Centre in Florida on Saturday.
The Florida launch, the first attempt of which was called off due to bad weather, uses a different rocket system from the Starship being tested out in Texas.
SpaceX has been contacted for comment.