The area has been cordoned off by police and investigators are inspecting the charred remains of the balloon.
Egypt's civil aviation minister has reportedly flown to Luxor to head the investigation into the crash.
Balloons were grounded for six months after that crash while safety measures were tightened up and pilots re-trained.
"For the safety of the tourists and the Egyptians I have ordered all the companies dealing with balloons to stop flights until we know exactly what happened and the reasons for it.