Three people were in critical condition after the incident occurred at 7:15 pm (local time) yesterday, while police said they had seized suspected liquid fire accelerants from the scene.
Police have ruled out the possibility of a terrorist attack and said the man acted alone with investigators looking into his mental condition.
Video footage showed chaos on the platform of the packed Tsim Sha Tsui station, with a train carriage on fire and one man lying on the floor with his clothes ablaze as bystanders tried to help him.
"I heard loud cries, and the smell of the fumes didn't smell like a normal fire -- it had a chemical smell," an eyewitness identified as Mr. Chow told reporters at the scene.
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"Once I inhaled it, it burned the throat," Chow said, adding that people were rushing out the station.
Police said yesterday they arrested a 60-year-old man surnamed Cheung for arson.
"The mental condition of the arrested person is one of (the) directions of (the) police's investigation," a government statement said today.
The SCMP had earlier reported that the man tried to light a Molotov cocktail and said "burn you to death" before he took out the bottle.
Local media said the suspect was also in critical condition, but police would not confirm the reports.
The Tsim Sha Tsui station, which services a popular shopping and nightlife district, was evacuated following the incident with trains skipping the station last night. It was re-opened today morning.
In 2004, 14 people were injured on the subway when a man started a fire in the city's Admiralty station during the morning rush hour.