The Twin-Otter turboprop aircraft belonging to Tara Air had gone missing minutes after it took off from the airport in the resort town of Pokhara on its way to Jomsom, the starting point of people trekking the Himalayas.
Its burnt-out wreckage was found in the western district of Myagdi and bodies could be seen scattered around it.
Ananda Pokharel, minister for culture, tourism and civil aviation, said the wreckage was found in Solighopte forest.
The 23 people on board included 18 Nepalese citizens, including two children, and two foreigners, apart from three crew members. One of the foreigners has been confirmed to be a Chinese and another a Kuwaiti national.
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The aircraft caught fire after it crashed, according to a search and rescue team present at the site of the accident.
Civil Aviation Authority of Nepal officials said that the reason of crash is yet to be probed. Residents in the area said they saw a huge explosion and fire in the remote area.
According to Home Ministry officials, there were dust particles in seven villages around the site in the district.
Earlier, three helicopters were dispatched from Kathmandu to locate the aircraft while Nepal Army, Armed Police Force and Nepal Police personnel were also mobilised.
"We have dispatched three helicopters on a search and rescue mission," the airline had said in a statement on its website.
"The weather at both origin and destination airports was favourable and the airport cleared for departure by the control tower at Pokhara," said the statement.
Since 1949 - the year the first aircraft landed in Nepal - there have been more than 70 different crashes involving planes and helicopters, in which more than 700 people have been killed.
In 2012, child actor Taruni Sachdev and mother Geeta Sachdev were among 15 people killed when a dornier aircraft crashed close to the Jomson airport. Taruni died in the Agni Air Flight CHT plane crash on her 14th birthday on May 14.