The crash happened when both trains were directly onto the same piece of track during routine repairs on Wednesday morning, according the SNCF, France's state railway company.
Initial reports indicated as many as 13 people had died in the crash, but Dominique Perben, the French transport minister, said the actual number of dead appeared to be lower, adding that fewer people were travelling on the train than first believed.
"We know that there are five victims now," he told France Info radio after visiting the crash site. "Are there more? It's very difficult to say right now ... but it seems unlikely"
French television said three bodies were still trapped in the twisted metal of the passenger train, but work to release them had been suspended because the wreckage had become too unstable for emergency staff to work in safely.
Officials said at least two people were in a serious condition in hospital.
Head on collision
"It is terrible," Patrick Hatzig, a vice-president of the Lorraine regional council, told Reuters by telephone from the site of the crash.
"There was a head-on collision. Some people were seriously injured and have been moved [to hospital]. Others are still trapped in there."
The crash occurred on a line linking Luxembourg to the French town of Thionville.
Dominique de Villepin, the French prime minister, was flying to the French Caribbean when news of the accident broke and decided to turn back to France to visit the crash scene.
Wednesday's crash appeared to be the worst train disaster in France since November 2002 when fire swept through a sleeping car on a Paris-Vienna express train, killing 12 people.
French railways said they had opened an inquiry into the collision.