Japanese media reported the fire might have been set near the front door, forcing people to find other ways out.
About 70 people were inside the three-story building when the fire broke out on Thursday morning.
The fire broke out in the building in Japan's ancient capital Kyoto, after the suspect, a man in his 40s, sprayed an unidentified liquid to accelerate the flames.
A fire official told reporters that at least 10 victims had been found on the stairs linking the second floor to the roof.
Several neighbors called the fire department around 10:35 a.m. after they heard an explosion and saw smoke rising from the building.
"A person with singed hair was lying down and there were bloody footprints", a 59-year-old woman living nearby told news agency Kyodo. "Even after I got back to my restaurant I could smell the smoke".
He was later arrested by police, who said he admitted to the crime but have not cited a motive in the atrocity. They are investigating the man, who is 41 and not a company employee, on suspicion of arson, police said.
NHK footage also showed sharp knives police had collected from the scene, though it was not clear if they belonged to the attacker.
Kyoto Animation also have produced video game cinematics for Konami's popular baseball series Jikkyo Powerful Pro Yakyu (or Power Pros as it's known in the west). On Twitter, some fans have noted that KyoAni also sells high-res, digital images on their website (all funds paid go directly to KyoAni, and the delivery of the pictures is automated, ensuring that no employees have further pressure thrust upon them in this hard time) and have even created English-language guides to help assist fans in purchasing these images. In addition to making animation, it publishes novels, comics and visual books, designs characters, and manages a school, according to its website.
The company's philosophy as posted on its website includes keeping a "humanitarian" corporate culture and believes that "promoting the growth of people is equal to creating the brightness of works". "We sincerely keep moving forward to be an Entertainment Corporation which based on Animation".
Kyoto Animation, better known as KyoAn, has been in operation since 1981 and is known as a producer of high-quality animation.