Earlier, airline spokesman Danyal Gilani said the Pakistan International Airlines plane carrying 40 passengers along with the crew had disappeared.
The ATR plane, with 42 passengers and five crew members, reportedly crashed at the Patola village near Pakistan Ordinance Factory, Havelian, about 70km (43 miles) north of capital Islamabad. He says all resources are being mobilized to locate the plane.
Witnesses said that "the aircraft has crashed in a mountainous area, and before it hit the ground it was on fire", local government official Taj Muhammad Khan told Reuters.
No further details were immediately available.
Another official, speaking from the scene, said there were unlikely to be any survivors. It is believed that the pilot did manage to make a mayday call just before contact was lost.
A local police officer, Saeed Wazir, told AFP that a plane "crashed and the locals tell us it is on fire".
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Flight PK-661 had been traveling from Chitral to Islamabad.
The passengers on the small plane operated by the state-run Pakistan International Airlines (PIA) included noted "Vital Signs" singer-turned-evangelist Junaid Jamshed and his family, Chitral Deputy Commissioner Osama Warraich, and three foreigners including a Chinese man, Dawn said.
Jamshed, a singer in one of Pakistan's first major rock bands in the 1990s, abandoned his singing career to join the Tableeghi Jamaat group, which travels across Pakistan and overseas preaching about Islam.
His last tweet, posted Sunday, showed pictures of "Heaven on Earth" in Chitral, the northern Pakistan city where the plane took off.
A Pakistani jet with 47 people on board has crashed, shortly after losing contact with ground control. All on board were killed.
PIA's emergency response centre has also been activated. A different plane flying that same route crashed Wednesday.