Tour operator Thomas Cook had earlier announced that two Britons had been killed and two more injured when the balloon plunged in flames to the ground in Luxor.
The company said that one of the two injured Britons had since died. This took the total death toll to 19.
Witnesses described how they had seen tourists jumping from the balloon after it exploded at 1,000ft before crashing in fields.
Bodies of the dead were scattered across the fields around the remnants of the balloon. Witnesses told of hearing a loud explosion before seeing plumes of smoke as the balloon caught fire and plunged into a sugar cane field west of Luxor.
French tourists, as well as other nationalities, are believed to be among the casualties, a security official said. There were more than 20 people on board.
A spokesman for air balloon tour operator Sky Cruise said the pilot is in a serious condition in hospital.
The four Britons were on holiday with tour operator Thomas Cook.
Witness Christopher Michel described the scene on Twitter, where he posted photographs showing the balloons ahead of the flight.
He said: "It was the balloon behind mine. I heard a loud explosion and saw smoke."
Mr Michel, who previously made a balloon excursion with an English pilot, said the Egyptian operation "did not feel quite as professional" as that of his first voyage.
The US photographer was taking aerial photographs at the time of the crash.
He said: "We flew over the ancient ruins.
"Just before landing in the cornfields, I heard an explosion and saw smoke. I wasn't sure what had happened at first.
"It was only when we landed we heard the full extent of what happened.
"Once we sat the balloon down I probably heard sirens within five minutes. They continued arriving for the next hour."
According to one report, the accident happened after a gas explosion at an altitude of 1000ft.
Hamdy Shabaan, operations manager at another operator, Sinbad hot air balloons, said the basket was on fire when it fell to the ground.
A spokesman for Thomas Cook said: "We are working closely with the Foreign Office and the authorities in Egypt and we can confirm that two of our guests are in local hospitals, but tragically two of our guests have died in the hot air balloon incident in Luxor, Egypt this morning."
Thomas Cook UK and Europe chief executive Peter Fankhauser said the incident was a "terrible tragedy", adding: "We're providing our full support to the family and friends of the deceased at this difficult time."
A Foreign Office spokesman said: "We are making urgent inquiries with the authorities in Egypt."
UK travel organisation Abta was seeking more information about the accident, as were other UK holiday companies who currently have people in Luxor, which is 320 miles south of the capital Cairo.
Hot air balloon trips usually take place at sunrise over the Karnak and Luxor temples, as well as the Valley of the Kings.
A balloon crash at Luxor in April 2009 left 16 people injured, including two British women.
Former policewoman Linda Lea, 67, from Stoke-on-Trent, still suffers from the multiple injuries she sustained in that crash. She said today: "I cannot believe this has happened again."
Following the 2009 crash, early morning hot air balloon flights in the area were suspended for six months while new safety measures were introduced and pilots given further training.