Andrew Buckley, 45, of Broadway in Horsforth said he got out of bed when he heard the loud bang which 'sounded like an explosion'.
Upon looking outside, My Buckley said he witnessed a couple of cars that were badly damaged.
He told the YEP: "We didn't see anything, just heard a bang.
"It sounded like an explosion. There were two cars.
"I got up and had a look and saw a couple of cars that were really badly damaged."
A number of people are said to have been seriously injured and the road is expected to remain closed for some time.
A West Yorkshire Police spokesperson said: "Police are currently at the scene of a serious road traffic collision in Broadway, at the junction of Bank Gardens in the Horsforth area of Leeds.
"Officers were called in the early hours of this morning at 2.41am to a collision between a car and a taxi.
"Enquiries are currently on going into the exact circumstances of the incident and a number of people have been seriously injured.
"The road remains closed and is likely to remain so for some time."