Altogether, 100 to 150 people suffered injuries in the collision, police say.
The crash occurred shortly after 7 a.m. Tuesday local time near the spa town of Bad Aibling, about 60 kilometers (37 miles) southeast of the Bavarian capital of Munich.
The collision left train carriages fused together and partly derailed, according to a statement from train company Meridian, which described the crash as a "terrible accident."
The crash occurred on the Mangfall Valley Railway, a single-track regional rail line running between the towns of Rosenheim and Holzkirchen, according to Meridian.
'We really have no clue'
How the two trains came to collide head-on on a single rail line was still unclear, said Christian Schreyer, board chairman for Transdev, which operates the railway.
"We really have no clue how this could happen," he told CNN. "Both of our trains have been on this track at the same time."
The trains were equipped with an automatic braking system that would stop them if they ran through a red signal. Also, each train had a driver and a driver instructor on board.
It would be extremely unlikely for both drivers on a train to miss a red signal -- and then for the automatic braking system not to kick in, Schreyer said.
"We assume that those signals were green, but we don't know yet," he said.
Schreyer said he was still en route to the crash scene from northern Germany, but from what he had heard, the trains were moving at speed when they collided.
"I don't think that (they) were on full speed, but looking at what has happened, they have been not very slow, let's say it that way," he said.
The trains were permitted to run at 120 kph, or just under 75 mph, on the line, he said.
Austrian emergency services called in
Helicopters have been ferrying rescue workers to the crash scene, where they are working to free people trapped in the wreckage and take the injured to hospitals.
Emergency services have been called into service from around Germany and neighboring Austria.
A journalist at the scene, Stephan Richter of German broadcaster RTL, told CNN that the Mangfall Valley Railway was one of the most important lines in the region, used by workers commuting from Bavarian villages to Munich.
It was a small mercy that the train was not as full as it usually would be, because of a school holiday, he said.
"We can only pray right now that the train was not packed out like on a regular basis," he said.
Schreyer said Transdev was shocked by the accident.
"It's really, really rare. We've been running the trains here for 12 years, and we've never had an accident yet."
Meridian said it could not comment on the condition of the train drivers.
German Justice Minister Heiko Maas tweeted his sympathies for those affected, writing in German: "Very bad news from #badaibling. Our thoughts are with the victims and injured. Thanks to the rescue workers."