Explosions of large Xe clusters (<N> ~ 11,000) irradiated by femtosecond pulses of 850 eV x-ray photons focused to an intensity of up to 10(17) W/cm(2) from the Linac Coherent Light Source were investigated experimentally. Measurements of ion charge-state distributions and energy spectra exhibit strong evidence for the formation of a Xe nanoplasma in the intense x-ray pulse. This x-ray produced Xe nanoplasma is accompanied by a three-body recombination and hydrodynamic expansion. These experimental results appear to be consistent with a model in which a spherically exploding nanoplasma is formed inside the Xe cluster and where the plasma temperature is determined by photoionization heating.