The plane operated by Indonesian carrier Trigana Air lost contact with air traffic control just before 3:00 pm (1130 IST) after taking off from Jayapura, the capital of Papua province, the search and rescue agency said.
The ATR 42-300 twin-turboprop plane was carrying 44 adult passengers, five children and five crew on the flight which was scheduled to take about 45 minutes, it said.
Officials said initially that villagers in the Okbape district of Papua reported seeing a plane crash. The transport ministry later said local residents had found the wreckage.
"The plane has been found (by villagers). According to residents, the flight had crashed into a mountain," said the transport ministry's director-general of air transportation, Suprasetyo, who goes by one name.
Officials were still verifying the information from local residents, he said. There was no information about whether anyone may have survived.
After the plane failed to land, Trigana Air sent another flight over the area to hunt for it but the aircraft failed to spot anything due to bad weather.
Captain Beni Sumaryanto, Trigana Air's service director of operations, told AFP that Oksibil was "a mountainous area where the weather is very unpredictable. It can suddenly turn foggy, dark and windy without warning.
"We strongly suspect it's a weather issue. It is not overcapacity, as the plane could take 50 passengers."
Trigana Air is a small airline established in 1991 that operates domestic services to around 40 destinations in Indonesia.
It has suffered 14 serious incidents since it began operations, according to the Aviation Safety Network, which monitors air accidents.
The airline is on a blacklist of carriers banned from European Union airspace.
Small aircraft are commonly used for transport in remote and mountainous Papua and bad weather has caused several accidents in recent years.
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