Another 200 were injured in Tuesday's incident, which happened on a narrow staircase leading to the hilltop temple in the village of Wai, about 250km south of Bombay, according to police superintendent Chandrakant Kumbhar.
Kumbhar said devotees set fire to shops in the crowded passageway after they heard rumours that some pilgrims had slipped on the temple floor and were trampled to death by others who were propelled forward by the mass of people behind them.
"When their relatives, who were still climbing the stairs, heard the news, they became angry and set fire to some shops," Kumbhar said. "About 200 pilgrims have been killed and an equal number of people have been injured."
The dead were mostly women, he said.
The fire spread to other parts of the temple grounds, and some structures were still in flames into the night on Tuesday, although the main temple complex was safe, he said.
Firefighters were trying to douse the flames.
Stampedes are not uncommon at
major Hindu religious gatherings
Kumbhar said that all pilgrims had been evacuated from the scene and that rescue workers had started to retrieve the bodies.
Earlier, police said the fire was caused by an electrical short-circuit in a makeshift shop.
About 300,000 people were reported to have gathered for the Hindu festival, according to AD Ingle, deputy superintendent of police in the area.
Hindus congregate every year at the hilltop temple of the Hindu goddess Mandra Devi on a full moon night, which falls on Tuesday.
Stampedes are not uncommon at major Hindu religious festivals, which can attract millions of worshippers. Authorities are often unable to cope with the huge crowds.
In August, 39 Hindus were killed when pilgrims stampeded on the banks of a holy river in Nasik, a town 175km northeast of Bombay.
Fifty-one pilgrims died in 1999 after a rope meant to channel worshippers snapped in a landslide at a Hindu shrine in southern India, while 50 people were killed in 1986 in a stampede in the northern town of Haridwar.
In the worst accident, about 800 pilgrims died during a Hindu festival in 1954 in the northern city of Allahabad.