The fire is thought to have begun in one of the towers of the San Miguel prison, south of the Chile capital Santiago.
At least 81 died in the fire and fourteen hospitalised in a critical condition, Health Minister Jaime Manalich told reporters. Four rescuers were also injured.
The incident was “probably the worst in the history of our penitentiary system,” the Health Minister said calling it an “enormous calamity”.
The local mayor said the fire broke out after a fight between inmates at the prison which local reports have described as severely overcrowded.
An investigation is now underway to determine the cause of the blaze.
Hundreds of relatives gathered outside the prison gates for news of loved ones. A list of the victims is expected to be released at a later date.