The 26-year-old man later turned himself in at a police station, admitting to officers: "I did it." He reportedly also said: "The disabled should all disappear."
Authorities identified the attacker as Satoshi Uematsu and said he had worked at the facility in Sagamihara, a city of more than 700,000 people west of Tokyo, until February.
Broadcaster NTV said the man told police he had been fired and held a grudge against the care centre.
A doctor at one of the hospitals where victims were taken described some with "deep stab" wounds to the neck.
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"The patients are very shocked mentally, and they cannot speak now," the doctor told national broadcaster NHK.
A fleet of ambulances, police cars and fire trucks converged on the Tsukui Yamayuri-en centre, a low-rise building nestled against forested hills, which was cordoned off and draped with yellow "Keep Out" tape.
An official from Kanagawa prefecture, which takes in Sagamihara, identified the suspect and said he had turned up at the police station with the murder weapons.
Uematsu "broke a glass window and intruded into the facility at about 2:10 AM and stabbed those staying there," Shinya Sakuma told a press conference in the prefecture's capital Yokohama.
"When Uematsu turned himself in, he was found carrying kitchen knives and other types of knives stained with blood."
"I was shocked," said Chikara Inabayashi, 68, who lives near the care centre which takes in up to 160 residents.
"I woke up at about 3 AM because of the blaring noise of the sirens," he told AFP.
Japan has one of the lowest rates of violent crime in the developed world, and attacks involving weapons of any kind are unusual.