The Pakistan International Airlines ATR-42 aircraft vanished after taking off from the Northern Chitral region, the airline has stated.
Pakistani pop star, actor and TV presenter Junaid Jamshed was among those who perished when the plane crashed.
It is also believed two children were among the casualties.
So far 36 bodies have been recovered from the site of the crash, AFP reports, with local legislator Sardar Aurangzeb Nalota saying there is 'no chance' anyone survived.
The national carrier confirmed in a statement that Flight PK-661, from the city of Chitral to Islamabad, had lost contact with air traffic controllers.
It is understood that a mayday call had been made shortly before the plane disappeared.
The airline has confirmed that the plane was carrying 42 passengers, five crew members and a ground engineer.
Taj Muhammad Khan, a government official based in the Havelian region, told Reuters: 'All of the bodies are burned beyond recognition. The debris is scattered.'
Police official Ilyas Abbasi told AFP that villagers had been retrieving body parts from the wreckage.
He said: 'The plane has crashed in a far-flung village in the mountains. One has to travel for more than four kilometres on foot to reach the spot. Villagers on site told us that the plane was first on fire and now smoke is rising from the wreckage.'
Reports in Pakistan suggest the plane was previously plagued by engine problems.
Secretary Aviation Irfan Ilahi told reporters in Islamabad, Geo News reports: 'It is premature to say anything at the moment, but we know that the aircraft had engine problems.'
The plane was around 10 years old, and had been involved in an incident in 2009, according to AirLive.
The airline said the plane was an ATR-42 turboprop aircraft, which lost contact en route from Chitral.
He said witnesses had told him that the aircraft had crashed into the mountainous area, and was on fire before it hit the ground.
It is believed that there were 31 men, nine women and two children on board the flight when it crashed.
Junaid Jamshed, a Pakistani pop star turned evangelical Muslim cleric, was on board, an airline official confirmed to Reuters.
Jamshed, who had 2.8 million Facebook fans, has been named among the world's 500 most influential Muslims.
In his last Twitter post, tweeted to his 441,000 followers, he described Chitral as 'heaven on earth'.
Osama Warraich, Deputy Commissioner of Chitral, was also on board the flight, the airline has confirmed.
Pakistani prime minister Nawaz Sharif released a statement which said: 'The entire nation is deeply saddened over today's unfortunate crash and shares the grief of the families who lost their dear ones.'
The aircraft was carrying 'around 40 people', the airline said in a statement, but the civil aviation authority has said 47 people were on board.
A passenger manifest shows 42 names.
It is not yet clear how many casualties there were. The airline said it has mobilised its emergency response centre.
Laiq Shah, a senior police official in the Khyber Pakhtunkhwa province, said the plane crashed in the province's Havelian area.
'Rescue teams are reaching the scene of the crash, and then we will know more,' Civil Aviation Authority spokesman Pervez George told Reuters.
There were no immediate details on casualties, but Pakistan's interior ministry has dispatched a team with experts on identifying bodies through DNA tests.
State-run Pakistan Television showed a huge fire rising from the site of the crash.
Villagers were seen standing near the site.
Geo News, citing civil aviation sources, said the plane lost contact with civil aviation authority at around 4.30pm local time.
Smoke was seen coming from the crash site, Pakistan Views reports. It said the plane took off at around 3pm, and lost contact with air traffic control 90 minutes later.
Shopkeeper Sannan Abbas said he had joined in with rescue efforts.
He told Al Jazeera: 'There was a lot of smoke when I got to the location and the wreckage of the plane was on fire.
'The first body we pulled out was badly burned. It was after that the rescue officials and the army got there.'
Jamshed rocketed to fame in Pakistan in the 1980s and 1990s as the singer for the Vital Signs rock group, and later launched a solo career, with a string of chart-topping albums and hits.
His name appeared on a passenger manifest for Pakistan International Airlines' (PIA) flight PK661, which crashed near the northern town of Havelian. His presence on board was confirmed by Sohail Ahmed, a PIA official in Chitral.
Jamshed retired from music in 2001 and announced that he was devoting his life to Islam, joining the conservative Tableeghi Jamaat religious organisation.