Police said remains were still being retrieved from the forests of the Margalla hills, where the plane came down shortly before 9am
The wreckage of the aircraft, which had taken off from Karachi earlier in the day, was spread across a wide area. Most of the dead are thought to be Pakistani, while two US citizens were also among the victims.
"There are no survivors. We believe all are dead," Imtiaz Elahi, the chairman of Islamabad's Capital Development Authority, told Reuters. "We are recovering the remains of the dead bodies from the wreckage."
Amir Ali Ahmed, a senior official in the Islamabad administration, said: "We do not expect any survivors. The recovery of bodies is going on right now."
Hafiz Khalid Zaheer, a local resident who had scrambled to the crash site, said he had seen only dead bodies there.
"People's heads and body parts are lying around. You cannot count them [the bodies]," he said. "Luggage is also scattered around the place. Everything is broken."
The Pakistani army has been called in to aid the rescue operation, and military helicopters could be seen hovering over the site of the crash.
A state of emergency has been declared in Islamabad hospitals. Relatives of passengers on the flight have been gathering at Islamabad airport, aseeking information.
"We are gathering information. We have no more details," Mubarik Shah, a spokesman for the state-run Civil Aviation Authority, said.
The Airbus jet, belonging to the private Airblue airline, lost contact with the control room at 8.43am as it flew from Karachi.
Witnesses said the plane appeared to be flying very low over houses in Islamabad, while reports suggested it had been circling the airport in heavy rain, awaiting permission to land.
The top of the hills were covered in cloud at the time, Anjum Rahman, a television reporter and nearby resident, said. "I saw it [the aircraft] pass over my house, and then there was a very loud explosion," she added.
Rescuers trying to reach the Margalla hills, which flank Islamabad to the west, were hampered by rain and difficult roads.
The interior minister, Rehman Malik said the country's prime minister and president had dispatched their personal helicopters for the rescue operation.
Saqlain Altaf, who heard the crash, told ARY he had been on a family outing in the hills when he saw the plane looking unsteady in the air.
"The plane had lost balance, and then we saw it going down," he said.
Pervez George, a civil aviation official, said the cause of the crash was not immediately clear.
"The plane was about to land at the Islamabad airport when it lost contact with the control tower, and later we learned that the plane had crashed," he said.
George said 146 passengers were on the flight, along with six crew members. The plane had been due to land at 9.30am.
Recent serious air crashes
22 May 2010: Air India Boeing 737-800 overshoots a hilltop runway at Bajpe airport, in Mangalore, and plunges over a cliff, catching fire as it hits the ground. One hundred and fifty-eight passengers die; eight survive.
12 May 2010: A Libyan-operated Airbus 330-200 carrying 104 people from Johannesburg, in South Africa, crashes on arrival at Tripoli airport in foggy conditions. In all, 104 people die; one Dutch boy survives.
30 June 2009: Yemenia Airbus A310, en route to the Comoros islands, crashes in the Indian Ocean with 153 people on board, only one of whom survives, a 14-year-old girl pulled from the sea.
1 June 2009: Air France Airbus A330 runs into thunderstorms over the Atlantic after leaving Brazil and disappears. All 228 people on board are killed.
17 July 2007: Tam Airlines Airbus A320 skids off the runway on landing during rain in São Paulo. The aeroplane travels across a busy highway before hitting a petrol station and catching fire. All 187 poeple on board are killed.
25 May 2002: China Airlines Boeing 747 breaks apart in midair en route to Hong Kong and crashes into the Taiwan Strait. All 225 passengers and crew are killed.Pakistan: 20 feared killed as small aircraft crashes in Karachi.
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