Federal Aviation Authority officials said the balloon carrying 16 people caught fire before crashing, but provided few other details. The Caldwell County Sheriff's Office said nobody on board survived.
Caldwell County Judge Ken Schawe said it looks like the balloon collided with a power line before catching fire and crashing to the ground.
The balloon may have struck power lines when it went down around 7:30 a.M. In pastureland near Lockhart, 48 km south of Austin, in an area often used for balloon landings, a public safety source told CNN.
"First I heard a whoosh," Margaret Wylie, who lives near the crash site, told CNN affiliate TWC. "And then a big ball of fire (went) up. I'd say it got as high up as those lower electric lines."
The 16 deaths make the balloon accident the deadliest on record in the US. Previously, the highest number of fatalities in a single US hot air balloon crash was six in 1993 in Colorado.
Officers found the balloon basket on fire on the ground, the statement said.
The FAA and National Transportation Safety Board are investigating.
The NTSB says it is working with the FBI to document the crash site, which was secured like a crime scene for evidence collection. Authorities have not named any of the people on board.
The name of the company involved in the crash is Heart of Texas Hot Air Balloon Rides, an official with direct knowledge of the investigation said.
NTSB spokesman Christopher O'Neill said 16 was the maximum number of passengers allowed under federal regulations governing hot air balloon operations.
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