Contact was lost with the Piper Navajo aircraft at 9:13 am (1313 GMT), shortly after it took off from Coyhaique, some 1,700 kilometers (1,000 miles) south of Santiago, AFP reported.
"The pilot and his six passengers" died, the General Directorate of Civil Aeronautics (DGAC) said in a statement, without specifying the cause of the crash.
The presidential delegate for the region, Rodrigo Araya, told reporters that he had instructed the prosecutor's office and the Forensic Medical Service to launch an investigation into the incident.
It was not immediately clear as to when the victims' bodies would be retrieved, due to the difficult weather conditions in the mountainous area.
"A bad weather front is coming, with snow," said Army General Mario Sepulveda, adding it "could take a couple of days, maybe three days."
The crash occurred the same day that a passenger plane in Brazil tumbled out the sky, killing all 61 on board.