The American space shuttle Columbia, which took-off on January 16 from Cape Canaveral, Florida, exploded over Texas at around 1930 IST (0900 EST) on Saturday.
Seven astronauts on board, including Indian American Kalpana Chawla, were killed. Chawla was the Columbia's space engineer and this was her second voyage into space.
The explosion occurred during the hottest part of re-entry, called the zipper effect, in which the panels come off.
A National Aeronautics and Space Administration spokesperson said, "It is highly unlikely they [the astronauts] would have survived... they were travelling at speed... They were on track, on their landing profile. There was no indication of trouble."
The NASA spokesperson said the last communication the ground crew had with the Columbia was around 0900 EST. It was a routine communication, she said, about the landing profile.
The Columbia was too far away to make an emergency landing, she added.
At the Kennedy Space Centre, the US flag next to the countdown clock was lowered to half-staff.
NASA has mobilised search and rescue teams in Dallas, Fort Worth area.
Debris was scattered over Nacogdoches county in Texas. Security personnel cordoned off the area where the debris landed even as reports continued to pour in from the city and the county.
At least two houses in Nacogdoches were damaged as pieces of the spacecraft tore through the roof. No injuries have been reported yet.
A piece, approximately three feet by four feet, landed in a parking lot blowing open the doors of the Commercial Bank of Texas, a local daily reported.
A steel tank about 5 feet in diameter was found on the runway of the Nacogdoches airport. The airport authorities used a pickup truck to take it off.
NASA has asked residents to stay away from the debris due to possible toxic propellants. Guards have been dispatched to secure the debris, which would help understand what happened.
A state of contingency was declared at mission control, said James Hartsfield of NASA.
Relatives of the astronauts who were awaiting the shuttle's arrival were taken away from mission control.
President George W Bush is monitoring the situation, a White House official said. Bush cut short his weekend retreat at Camp David, Maryland, and returned to Washington, DC. He also spoke with NASA administration.
In Israel, the office of Prime Minister Ariel Sharon issued a statement that "the government and people of Israel are praying for the safety of the astronauts on board space shuttle Columbia".
Among the astronauts was an Israeli Air Force colonel, the first Israeli to go into space. Col Ilon Ramon, an ace F-16 pilot, had also taken part in the Israeli air raid that destroyed the Iraqi nuclear reactor at Osirak. Ramon, the son of holocaust survivors, carried a photo of a painting by a young boy who perished in Auschwitz.
Fox News said Chawla had "immigrated from India in 1994". "In her only other flight in 1997, she made mistakes on board that sent the science satellite tumbling out of control. Two astronauts had to go on a space-walk to capture it," it said.
The shuttle was on a research mission, and was launched from the Kennedy Space Centre at 1039 EST (2119 IST) amidst tight security cover in near-perfect weather.
In 42 years of space flights, NASA had never lost a crew during landing.
In 1986, the space shuttle Challenger exploded 73 seconds after lift-off, killing all seven astronauts on board.