Iranian Interior Minister Abdolvahed Mussavi Lari said the final figure would be far higher than the initial government estimates of 20,000 dead and 30,000 injured.
"We project the scale of the catastrophe being even greater and the number of victims being much higher than has been announced," he told state radio.
Health Minister Massoud Pezeshkian claimed that in Bam, a city of 90,000 people "65 to 70 percent of the population have either been killed or injured."
The scale of the disaster overwhelmed emergency services, who were unable to access large areas of the earthquake zone.
Hopes for those buried under the rubble have all but vanished after temperatures plummeted below zero degrees Celsius overnight.
The Iranian news agency (IRNA) is reporting that over 90 per cent of the historical city of Bam and large sections of Kerman province has been destroyed by the earthquake that struck early Friday morning and measured 6.3 on the Richter scale.
An aerial photograph shows the
devastated historical city of Bam
Bam's renowned mud brick architecture was unable to withstand the magnitude of the earthquake. A large part of the ancient citadel was destroyed, Kerman province governor Mohammad Ali Karimi said.
Dating back 2000 years, it had sprawling fortifications, towers, buildings, stables and a mosque. It was the city's main tourist attraction. "The city of Bam must be built from scratch," said its governor Ali Shafiee.
Bereaved residents in the town wandered the streets pleading for the authorities to speed up rescue efforts. The city's two hospitals were destroyed in the earthquake, and while field hospitals were set up, they were overwhelmed by the volume of casualties.
The interior minister said the top "priority is to get help to the injured who are under the rubble. It is very cold in the region and we are very concerned" for them.
An Iranian man stands in among the
rubble of his former home in Bam
"Our second priority is to get the wounded to hospitals in the region," the minister said, adding that five military aircraft were shuttling between Bam and Kerman.
Twelve sniffer dogs were sent into Bam on Saturday morning to try to locate survivors under the rubble, but relief
workers said they expected to find mainly corpses.
"We urgently need body bags," rescue coordinator Mohammad Jahanshahi told state news agency IRNA overnight.
"When daybreak comes, thousands of bodies will be pulled from the ruins and we have an immediate need for bags to transport the bodies."
More than a dozen European countries, along with China, Japan, South Korea and the United States were mobilising
aid, as well as the United Nations and the Red Cross.
Rescue workers put out a plea to the international community not to send aid workers, but instead supply drugs and
equipment, such as ventilators and mobile X-ray machines.
Interior Ministry spokesman Jahanbakhsh Khanjani said "Iran urgently needed sniffer dogs and machines that would detect eventual survivors, medicines, blankets, tents and prefabricated units."
The injured wait to be transferred
by plane to hospitals in Iran
The Iranian government announced that it would accept offers of assistance from all countries except Israel.
"Iran will accept humanitarian aid from all countries and international organisation except the Zionist regime", said a government spokesperson.
Heiner Gloor, of Swiss Rescue, said "I've never seen anything like it. It is a picture of total devastation. It is a huge area which has been hit. For the moment, the focus is on Bam, but there are outlying villages whichwe still haven't got to."
State television said no rescue teams had been able to go to the small towns and villages around Bam, which are
home to a further 110,000 people, and inhabitants had been left to fend for themselves.
UN Secretary General Kofi Annan's office said the world body had granted immediate emergency aid of $90,000 for Iran. For its part, the the International Federation of Red Cross and Red Crescent Societies is preparing an appeal for $8 million, a spokesman in Geneva said.
Earthquakes are very frequent in Iran. Since 1991 nearly 1000 of them have claimed some 17,600 lives and injured 53,000 people, according to official figures.
On August 27, a tremor of 5.7 jolted the Bam area, but caused no casualties.
The last major quake came in June 2002, when a tremor of 6.3 hit north-western Iran, killing 235 people and injuring
more than 1300.