Col. Guido Pedroso de Melo, the commander of the city's fire department, said emergency responders counted at least 232 dead, down from a previous estimate of 245, The New York Times reported.
Most of the deaths at the Kiss nightclub appeared to have been the result of smoke inhalation, CNN reported. Authorities have identified 185 of them, the report said.
More than 90 people were hospitalized, including 14 for treatment of severe burns.
Col. Adilomar Silva, the regional coordinator of civil defense, said the death toll was expected to rise as firefighters were still pulling bodies out of the club.
Silva said the acoustic insulation in the nightclub caught fire, adding that a pyrotechnics show going on inside the club when the fire started.
Guido de Melo, a state fire official, said there were about 2,000 people in the club, twice its maximum capacity, when the fire broke out around 2 a.m. local time, CNN reported.
He told O Globo, Rio de Janeiro, security guards prevented people from leaving the club after the fire broke out.
"People who were inside the facility informed us ... that security guards blocked the exit to prevent people there from leaving, and that's when the crowd starting panicking, and the tragedy grew worse," he said.
Glauber Fernandes, a reporter from CNN affiliate Band News, reported some of the guards thought there had been a huge fight inside the club "and closed the doors so that the people could not leave without paying their bills from the club."
Luana Santos Silva, who was at the nightclub, told O Globo there was just one "small door for a lot of people" to use in the panic to get out.
Fernandes said many victims were trapped inside the building after a roof collapsed in several places.
Authorities have not yet determined the cause of the fire but pyrotechnics band used during a show before the fire broke out, CNN said.
A fire official told Globo TV the club's license expired in August and had not been renewed.
Santa Maria is home to the Federal University of Santa Maria, as well as a number of other universities, most of which resume classes Monday after summer break.
Rio Grande do Sul Gov. Tarso Genro took to Twitter to lament the fire.
"Sad Sunday! We are taking appropriate action and possible. I'll be in Santa Maria in the late morning," Genro tweeted.
Speaking from Chile where she was attending a regional summit, Brazilian President Dilma Rousseff said she would go to Santa Maria Sunday.