Officers arrived at the scene shortly after 06:00 (12:00 GMT) on Friday after reports of gunshots.
Police said when they arrived, the van was broadcasting messages warning it would explode. It blew up a bit later.
Three people were injured, none of them critically, and have been taken to hospital, officials said.
Buildings and trees were damaged, and smoke rose above the city centre.
It was not clear whether anyone was inside the vehicle at the time of the explosion, police said. They had been working to evacuate nearby buildings when the detonation took place.
The FBI is leading the investigation. Agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives are also involved.
Investigators have not yet determined who was behind the explosion or what the motive was.
Police took a number of people to the central precinct for questioning, but declined to give any details, according to the Associated Press (AP). They have released an image of the vehicle arriving at the scene early on Friday.
BREAKING: This is the RV that exploded on 2nd Ave N this morning. It arrived on 2nd Ave at 1:22 a.m. Have you seen this vehicle in our area or do you have information about it? Please contact us via Crime Stoppers at 615-742-7463 or online via https://t.co/dVGS7o0m4v. @ATFHQ pic.twitter.com/JNx9sDinAH
— Metro Nashville PD (@MNPDNashville) December 25, 2020
Resident Buck McCoy said he was woken up by the blast. He posted a video on Facebook, showing debris and water running down walls, with alarms howling in the background.
"All my windows, every single one of them got blown into the next room. If I had been standing there, it would have been horrible," Mr McCoy told AP. "It felt like a bomb. It was that big."
Images from the scene showed blown-out windows, damaged buildings and felled trees. The explosion hit an area of Nashville known for its restaurants and nightlife.
"To this point, we do believe that the explosion was an intentional act," police spokesman Don Aaron told reporters.
CCTV footage posted on YouTube appeared to show the moments before the explosion, when a warning was broadcast, saying, "If you can hear this message, evacuate now". A loud bang follows and flames and smoke fill the screen.
"It looks like a bomb went off," Nashville Mayor John Cooper said, urging people to stay away from the area.
In a tweet Tennessee Governor Bill Lee pledged to supply "all of the resources needed" to investigate what happened and who was behind it.
US President Donald Trump has been briefed on the matter.
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