"We know there is a significant number of dead bodies in the water" and other people dead in attics, Mayor Ray Nagin said on Wednesday.
Asked how many, he said: "Minimum, hundreds. Most likely, thousands."
The estimate came as army engineers struggled to plug New Orleans's breached levees with giant sandbags and concrete barriers, while authorities drew up plans to clear out the tens of thousands of people left in New Orleans and all but abandon the flooded-out city.
There will be a "total evacuation of the city. We have to. The city will not be functional for two or three months", Nagin said.
Most of those refugees - 15,000 to 20,000 people - were in the Superdome, which had become hot and stuffy, with broken toilets and nowhere to bathe.
"It can no longer operate as a shelter of last resort," the mayor said.
Nagin estimated 50,000 to 100,000 people remained in New Orleans. He said 14,000 to 15,000 a day could be evacuated.
A New Orleans family waits on
their porch to be rescued
With the streets awash and looters brazenly cleaning out stores, authorities planned to move at least 25,000 of New Orlean's storm refugees - most of them taking shelter in the dank and sweltering Superdome - to the Astrodome in Houston in a vast exodus by bus.
Around midday, officials with the state and the Army Corps of Engineers said the water levels between the city and Lake Pontchartrain had equalised, and water had stopped rising in New Orleans, and even appeared to be falling, at least in some places.
But the danger was far from over.
The Army Corps of Engineers said it planned to use heavy-duty Chinook helicopters to drop 1350kg sandbags on Wednesday into the 150-metre gap in the failed floodwall.
But the agency said it was having trouble getting the sandbags and dozens of 4.5-metre highway barriers to the site because the city's waterways were blocked by loose barges, boats and large debris.
The Pentagon, meanwhile, began mounting one of the largest search-and-rescue operations in US history, sending four Navy ships to the Gulf Coast with drinking water and other emergency supplies, along with the hospital ship USNS Comfort, search helicopters and elite SEAL water-rescue teams.
American Red Cross workers from across the country converged on the region.
The death toll from Katrina reached 110 in Mississippi. But Louisiana has put aside the counting of the dead to concentrate on rescuing the living, many of whom were still trapped on rooftops and in attics.
Rescue teams help evacuate
people trapped in flooded homes
A day after the Big Easy thought it had escaped Katrina's full fury, two levees broke and spilled water into the streets on Tuesday, swamping about 80% of the bowl-shaped, below-sea-level city, inundating miles and miles of homes.
As New Orleans descended deeper into chaos, hundreds of people wandered aimlessly up and down Interstate 10, pushing shopping carts, laundry racks, anything they could find to carry their belongings.
Dozens of fishermen from up to 320km away floated in on caravans of boats to pull residents out of flooded neighbourhoods.
On some of the few roads that were still passable, people waved at passing cars with empty water jugs, begging for relief. Hundreds of people appeared to have spent the night on a crippled highway.