Damage initially was set at $150,000, fire marshals said.
"We believe a vehicle may have blown up inside the building,'' said Hagerstown Fire Marshal John Hersh, who was at the scene assisting state fire marshals with the investigation.
Richard Hebb said later Thursday that a gas tank that had been removed from a minivan exploded.
Fire quickly engulfed the 20-by-45-foot two-story masonry and frame building, gutting the garage and a second-floor apartment.
Evelyn Hebb, the wife of Richard Hebb, said she was inside their house at 20110 Trovinger Mill Road, behind the garage, when she heard the explosion.
"I looked out the window. I saw the black smoke. I knew what happened," she said.
The Hebb family has owned the garage for 50 years, Evelyn Hebb said.
Richard Hebb still helps out at the garage; son James has worked there for about 20 years and grandson Scott, a student at Hagerstown Junior College, works there part time, she said.
Dawn Shank, the occupant of the two-bedroom apartment above the garage, arrived on the scene within a few minutes after the initial call.
When she arrived, fire was still rolling out of the windows and roof of the building that had been her home for five years.
Shank, 32, said her three cats were in the apartment at the time of the explosion.
The bodies of the cats were found later, her mother, Betty Henson, said.
Shank lived in the apartment with her 3-year-old son, who was at the babysitter's when the explosion occurred, Henson said. She did not have renter's insurance.
Several neighbors reported hearing an explosion but said they initially mistook it for the sound of an automobile wreck, a frequent occurrence along that stretch of road.
"I thought it was a big crash because it was basically the same sound - a big boom and glass shattering," said Lisa Clark, of Morgantown, W.Va., who was visiting her parents across the street from the garage.
Clark, whose husband called 911, said she saw two men fleeing the garage, one with his arms and legs on fire and the other with his feet on fire.
Clark said she saw a third man run into the store next door to the garage.
Another neighbor, who declined to give her name, said she, too, called 911, and then took blankets and ice to the burned men.
"All I heard was an explosion. I came out and saw the garage fully engulfed," said Sid Leather, who lives at 20045 Jefferson Blvd., across the street from the garage.
Passerby Steve Greathead said he was westbound on Jefferson Boulevard approaching the garage when he heard explosions.
"I could feel the heat and see the flames,'' Greathead said. He pulled over just past the garage and began stopping traffic.
Dick Mummert, a Washington County sheriff's deputy, was in the vicinity and arrived to lend his support with traffic control.
After the blaze was contained, a fire tower was set up on one of the ladder trucks and water was directed toward hot spots on the second floor, which was too unstable to safely support firefighters.
Hagerstown Fire Department Battalion Chief Ron Horn said the second floor and part of the roof had collapsed.
Washington County Fire and Rescue Coordinator Jerry Reed commended the first firefighters on the scene for safely and aggressively stopping the fire from spreading next door to Hebb's Auto Sales or elsewhere.
Responding to the alarm were more than 50 firefighters from Longmeadow, Funkstown, Leitersburg, Mount Aetna, the Hagerstown Fire Department, Washington County Air Unit and the Hazardous Response Unit.
Community Rescue Service took the injured to the hospital.
Shortly after 4 p.m. the Hazardous Response Team requested a representative from the Washington County Health Department to check on possible contamination of well water in the area due to runoff from the firefighting effort.
Washington County Fire Police rerouted traffic onto Eastern Boulevard and through Robinwood for several hours.
Firefighters remained on the scene into the evening hours.
Shank's coworkers at the Staples store on Wesel Boulevard have begun collecting money, clothing and other items for her. To donate call Kelli at 714-0370.