The military and foreign ministry in Israel, which has long accused Khartoum of serving as a base for militants from the Palestinian Islamist group Hamas, refused to comment.
Osman said four radar-evading aircraft conducted an attack at around midnight on the Yarmouk military manufacturing facility in the south of the Sudanese capital.
Evidence pointing to Israel was found among remnants of the explosives, he said, adding that the cabinet would hold an urgent meeting.
Residents of the area earlier said an aircraft or missile flew over the facili-ty shortly before the plant exploded and burst into flames.
A journalist several kilometres away saw two or three fires flaring across a wide area, with heavy smoke and intermittent flashes of white light bursting above the state-owned factory.
In 1998, Human Rights Watch said a coalition of opposition groups alleged that Sudan stored chemical weapons for Iraq at the Yarmouk facility but government officials strenuously denied the charges at the time.
In August of that year, US cruise missiles struck the Al-Shifa pharmaceutical factory in North Khartoum, which Washington alleged was linked to chemical weapons production.
Evidence for that claim later proved questionable.
`I heard a sound like a plane in the sky, but I didn`t see any light from a plane. Then I heard two explosions, and fire erupted in the compound, said a resident who asked to be identified only as Faize.A woman living south of the compound also reported two initial blasts.
`I saw a plane coming from east to west and I heard explosions and there was a short length of time between the first one and the second one,` she said.
`Then I saw fire and our neighbour`s house was hit by shrapnel, causing minor damage. The windows of my own house rattled after the second explosion.
The sprawling Yarmouk facility is surrounded by barbed wire and set back about two kilometres from the district`s main road, meaning signs of damage were not visible later Wednesday when a journalist reporter visited.
But at least three houses in the neighbourhood had been punctured by shrapnel which left walls and a fence with holes about 20-centimetres in diameter, the reporter said.
There was also slight damage to a Coca-Cola warehouse.
The fires appeared to be extin-guished by 3.30am, more than three hours after they began, a journalist said.
Osman said Yarmouk makes `traditional weapons`.
`The attack destroyed part of the compound infrastructure, killed two people inside and injured another who is in serious condition,` he said.
There have been other mysterious blasts in Sudan and allegations of Israeli involvement.
In April last year, Sudan said it had irrefutable evidence that Israeli attack helicopters carried out a missile and machinegun strike on a car south of Port Sudan.
Israel refused to comment.
Last year`s attack mirrored a similar strike by foreign aircraft on a truck convoy reporte dly laden with weapons in eastern Sudan in January 2009.
Khartoum is seeking the removal of US sanctions imposed in 1997 over alleged support for international terrorism, its human rights record and other concerns.-AFP
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