Rashedul Islam, the local fire chief, said up to 500 people were believed to be working in the factory when the fire broke out on Thursday night. He added that there were more bodies inside that had not yet been pulled out.
Islam said: "We just managed to put out the fire after more than 10 hours. The building is still smouldering and army troops are on the scene to assist."
Witnesses said the fire followed a loud noise on Thursday evening. They said the main gate of the factory was locked by the factory's caretaker, trapping many workers, most of them women, inside.
A worker from the factory said: "The main gate was locked when we heard a loud noise followed by fire and an electricity cut. Some neighbours cut open the window grilles to help us out."
Salauddin Ahmed, a doctor at the emergency ward of Chittagong Medical College Hospital, said about 60 people were hospitalised, "mostly with burn injuries and some with broken ribs after they jumped from the upper floors".
Emergency crews reportedly managed to evacuate the ground floor but many people were believed to have been trapped in the upper levels of the four-storey building.
Poor safety record
One witness said he saw people jumping from the third floor to escape the blaze, believed to have been started by a short circuit.
Bangladesh is home to about 4000 textile factories which have been plagued by accidents due to poor safety standards.
Textiles are Bangladesh's biggest export, bringing in nearly 80% of its total foreign exchange earnings.
Six people were killed earlier this month at a textile factory fire near Dhaka. Last April, more than 70 people died when an illegally constructed garment factory collapsed.
A government investigation found it had been built on marshland without planning permission.
In November 2000, at least 48 workers died and more than 150 were injured when they were trapped in a burning factory near Dhaka due to a locked fire exit.