The Zenit-3SL rocket, which was being operated from a floating pad south of the Hawaiian islands, failed 40 seconds after the lift-off at 06:56 GMT. The Intelsat-27 satellite was due to be positioned over the Atlantic to provide services to the Americas and Europe.
Officials say no-one was hurt as a result of the incident. Staff from the Sea Launch company, which organised the launch, direct all missions from a support vessel that sits at a safe distance of about 6.5km uprange of the platform.
The firm said it would establish a review board to determine what went wrong.
"We are very disappointed with the outcome of the launch and offer our sincere regrets to our customer, Intelsat, and their spacecraft provider, Boeing," Kjell Karlsen, president of Sea Launch AG, said in a statement.
"The cause of the failure is unknown, but we are evaluating it and working closely with Intelsat, Boeing, Energia Logistics Ltd and our Zenit-3SL suppliers. We will do everything reasonably possible to recover from this unexpected and unfortunate event."
Sea Launch had not long returned from Chapter 11 bankruptcy protection. A spectacular rocket failure on its converted oil rig in 2007 forced the firm to restructure its finances as orders slowed and debts mounted.
It re-emerged in 2011 and had lofted four satellites successfully from the Odyssey platform before Friday's loss.