The balloon, which was carrying 21 people, was flying at 1,000 ft (300m) when it caught fire and exploded before plunging onto fields west of Luxor, news agencies reported, quoting officials.
A spokesman from the Hong Kong government confirmed to the BBC that nine Hong Kong residents were involved in the accident and a team of immigration officers was being sent to Egypt.
One witness told the BBC that people were jumping out of the balloon, "from about the height of a seven-story building.” The report said that a gas cylinder exploded on board the balloon, bringing it down. The British foreign office told the BBC it was making urgent inquiries to confirm reports of British casualties.
The two survivors, including the balloon's pilot, have been admitted to a hospital, the AFP reported.
Hot air balloon flights in Luxor give tourists an aerial view of the city’s famous sites, such as Karnak temple and the royal tombs in the Valley of the Kings.
Konny Matthews, assistant manager of Luxor's Al Moudira hotel, told Reuters she heard a boom around 7:00 a.m. (05:00 GMT) local time.
"It was a huge bang. It was a frightening bang, even though it was several kilometers away from the hotel," she was quoted as saying.
In April 2009, a balloon crashed in Luxor, injuring 16 people.