The accident occurred around 7:45 a.m. near Jolly Road north of Cistern Road, which is in the Maxwell area, Caldwell County sheriff's officials said in a statement.
Sheriff Daniel Law said they responded to a 911 call about a possible vehicle crash. When emergency responders and sheriff's officials arrived, it was apparent the reported fire was the basket portion of the hot air balloon, according to the statement.
According to FAA officials, the hot air balloon crashed after striking a high-voltage power line in the area and catching fire.
Local officials confirmed to ABC News 16 people were dead at the scene. One of the victims was the pilot of the balloon. He was identified as Skip Nichols, who flew for Heart of Texas Hot Air Balloon Rides.
NTSB data revealed the incident was the deadliest hot air balloon crash in U.S. history since NTSB records began.
The deadliest crash before this was in 1993, which left six people dead. Since 1964, there have been 73 fatal accidents, resulting in 124 deaths.
The land near the crash site is mostly farmland, with corn crops and grazing cattle. Cutting through that farmland is a row of massive high-capacity transmission lines about 4 to 5 stories tall. The site of the crash appeared to be right below the overhead lines.
A portion of surrounding streets were closed as officials conducted a preliminary investigation.
Texas Gov. Greg Abbott asked in a statement that "all of Texas to join us in praying for those lost."
Lockhart is about 30 miles south of Austin.
The Associated Press contributed to this report.