Pakistani Defence Minister Chaudhry Ahmed Mukhar told reporters the Boeing 737-200 from Karachi was preparing to land when it came down around 6.30pm local time on farmland a few miles from Islamabad's Benazir Bhutto International Airport.
Television images showed heavy rains and wind lashing the crash site.
Witnesses, who reported to hearing a loud bang, also said they believed that the Bhoja Airlines plane, which had 118 passengers and nine crew on board, was already in flames when it crashed.
Emergency services teams have been working hard, with many using flashlights to comb the area.
Parts of the plane, including a wing and engine, were found up against a small building. Bodies were also reported to be strewn over a large area. Officials said they doubted there would be any survivors.
"We can see the plane's wreckage is on fire and we are trying to extinguish it. We are looking for survivors," said emergency services official Saifur Rehman.
It is likely to take investigators weeks to determine the cause of the crash.
One report suggested the plane was at least 40 years old and had previously been the focus of safety concerns. It said Bhoja Airlines had bought the aircraft from Shaheen Airlines. The latter was reported to have allegedly scrapped it after it was deemed unworthy.
Bhoja Airlines started domestic operations in Pakistan in 1993, expanding to international flights in 1998. But the airline suspended its operations more than 10 years ago. It had only re-opened again last month. (Independent News Service)