Two were still missing and presumed dead, Virginia State Police spokeswoman Corinne Geller said during a press conference on Saturday morning.
"We are transitioning from a rescue to a recovery operation," she said.
A pilot and two passengers were believed to be on board one of three hot air balloons that took off shortly before 8 p.m. on Friday, and attempted to land a short time later at a designated landing area, according to witnesses.
Three of two successfully touched down, but the third hit the power line as it neared the ground, igniting a fire. The pilot tried to open the top of the balloon in an effort to get the fire under control, but the balloon rose quickly, Geller said. Witnesses then heard two explosions and, at one point, the gondola and balloon separated, she said.
On Friday evening, local resident Carrie Hager-Bradley told NBC12 she was on her way home after a trip to the grocery store when she saw the balloon in flames.
Hager-Bradley said she could hear cries from those on board.
"They were just screaming for anybody to help them. 'Help me, help me, sweet Jesus, help, I'm going to die, oh my God, I'm going to die,'" she told the station.
Her daughter saw what appeared to be an occupant of the balloon fall to the ground, Hager-Bradley added.
The balloons lifted off from the Meadow Event Park in Caroline County, Va., which is north of Richmond, on the eve of Mid-Atlantic Balloon Festival. It is believed the balloon crashed northeast of the park.
The remainder of the festival has been cancelled.
Cole Holocker, 18, told NBC News he was headed to North Carolina with his family on Route 301 near Army base Fort A.P. Hill when he noticed smoke billowing in the distance.
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