It is thought stage fireworks set off a blaze inside the Kiss nightclub in Santa Maria.
Those inside, the majority of them young people, died from asphyxiation or from being trampled.
Latest reports suggest at least 230 have been killed. Those who survived managed to find the emergency exits.
"You never think this will happen to anyone you know," said one man. "I have seen friends being buried today. I saw two brothers being buried and I have just found out that another one of my friends is among those who died."
Another man was very sad because he has lost his son. "My son was full of life," he told reporters, "and full of health at 27 years old."
Footage captured on a mobile phone shows the extent of confusion and panic inside the nightclub.
More than one hundred people are being treated in hospital after breathing in smoke.
The first funerals will be held today. President Dilma Roussef has cut short a visit to Chile to return to Brazil.
