The accident was caused by a gas explosion, which sent the balloon plummeting about 1,000 feet to the ground, EgyNews said.
Two people, including the pilot, survived the accident and were taken to Luxor International Hospital, officials said.
The tourists who died are believed to be from Japan, Hong Kong, Britain and France, Egyptian media reported.
Christopher Michel told Sky News he was in one of eight balloons flying in the area when the accident occurred.
"We were approaching landing ... coming down in a remote field just outside Luxor. We heard a loud explosion behind us and I looked back and saw lots of smoke," he said.
Michel said at first it was unclear that a balloon had exploded.
Sky News noted it isn't the first incident, adding in April 2009 16 people were hurt when their balloon crashed, also near Luxor.