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It was one of the worst accidents involving tourists in Egypt and likely to push the key tourism industry deeper into recession. The casualties included French, British, Japanese nationals and nine tourists from Hong Kong, the official said.
Three survivors of the crash - two tourists and one Egyptian - were taken to a local hospital.
According to the Egyptian security official, the balloon carrying at least 20 tourists was flying over Luxor when it caught fire, which triggered an explosion in its gas canister, then plunged at least 300 meters (1,000 feet) from the sky.
It crashed into a sugar cane field outside al-Dhabaa village just west of Luxor, 510 kilometers (320 miles) south of Cairo, said the official, speaking on condition of anonymity because he was not authorized to talk to the media.
Bodies of the dead tourists were scattered across the field around the remnants of the balloon. An Associated Press reporter at the crash site counted eight bodies as they were put into body bags and taken away. The security official said all 18 bodies have been recovered.
The official said foul play has been ruled out. He also said initial reports of 19 dead were revised to 18 as confusion is common in the aftermath of such accidents.
In Hong Kong, a travel agency said nine of the tourists that were aboard the balloon were natives of the semiautonomous Chinese city. It did not say whether all nine were killed. The information was posted on the agency's website.
In Paris, a diplomatic official said French tourists were among those involved in the accident, but would give no details on how many, or whether French citizens were among those killed.
Speaking on condition of anonymity because he wasn't authorized to be publicly named according to government policy, the official said French authorities were working with their Egyptian counterparts to clarify what happened. French media reports said 2 French tourists were among the dead but the official wouldn't confirm that.
Hot air ballooning, usually at sunrise over the famed Karnak and Luxor temples as well as the Valley of the Kings, is a popular pastime for tourists visiting Luxor.
The site of the accident has seen past crashes. In 2009, 16 tourists were injured when their balloon struck a cellphone transmission tower. A year earlier, seven tourists were injured in a similar crash.
Egypt's tourism industry has been decimated since the 18-day uprising in 2011 against autocrat leader Hosni Mubarak and the political turmoil that followed and continues to this day.
Luxor's hotels are currently about 25 percent full in what is supposed to be the peak of the winter season.
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