The incident took place near Bucch railway station in Sher Shah area.
It occurred when a man reportedly was overrun by a freight train and the driver stopped it to take out the body, said police official Nadir Chattha.
In the meantime, Awam Express heading on the same line collided with the stationary goods train.
The collision wrecked the engine and power van, and overturned four bogies of Awam Express, he added.
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Three people trapped inside damaged carriages were also saved, said rescue workers.
A delay was initially observed in response by rescue services due to Eid holidays, according to sources. Relief works were also affected as darkness prevailed in the vicinity.
The passenger train was en route to Karachi from Peshawar.
Meanwhile, authorities have imposed emergency at Multan's Nishtar Medical Hospital and Shahbaz Sharif Hospital.
Earlier, railway authorities ordered investigations into the accident.