It is believed at least 13 people are dead after being found unconscious on the second floor of the building, according to the Japanese wire service Kyodo. Almost 40 others have been injured.
A 41-year-old man has admitted to police to lighting the fire. The man, who was taken to hospital after being injured in the blaze, was heard by witnesses yelling "die" as he lit the fire.
The man was seen pouring what appeared to be gasoline around the studio and police said knives were also found at the scene.
The blaze occurred at Kyoto Animation, a studio dating back to 1981. Around 70 people were working in the building when the fire broke out, at just after 10:30am local time.
Witnesses described scenes of horror in the aftermath of the blaze.
"A person with singed hair was lying down and there were bloody footprints," one witness told Kyodo.
"I heard a bang and the black smoke and the burning smell were awful," another said.
The arson follows a knife attack earlier this year in the city of Kawasaki, where a man went on a stabbing rampage at a bus stop, killing two and injuring a dozen others.