The accident occurred over Cappadocia's sculpted rock formations when one balloon's basket ripped another's envelope in mid-air, the governor of Nevsehir province, Abdurrahman Savas, told Anatolia news agency.
"The lower balloon was torn and fell quickly," he said, citing witness accounts.
Savas said two Brazilians aged 71 and 65 "lost their lives", while most of the injured suffered broken bones.
A third Brazilian aged 76 died in hospital hours later, Anatolia reported, adding that 10 Spaniards, seven Brazilians, three Argentines, a Portuguese and a Puerto Rican were wounded.
Turkish television said aviation authorities have launched an investigation into the accident.
Ballooning has become increasingly popular in recent years in Turkey.
Several companies offer hot-air balloon rides over Cappadocia, which is a major tourist attraction with its cone-shaped rock formations, rock-carved underground cities and early Christian churches.
The owner of the hot-air balloon that went down said he was "shocked" by the tragedy but said the pilot had taken all the necessary safety measures.
"These types of flights have been happening safely in Cappadocia for 20 years," Halil Uluer told the news agency.
The accident comes three months after a balloon exploded in Luxor, Egypt, killing 19 people on February 26.
In 2009, a British tourist was also killed in a balloon crash during a tour of the Cappadocia region.
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