Algeria's defence ministry said 257 people died when a military plane carrying soldiers and their families crashed soon after takeoff on Wednesday.
The aircraft went down near Boufarik Airport, situated 32 kilometres from the capital Algiers.
The head of the military has ordered an investigation into the crash as the causes are still unknown, according to a statement from the defence ministry.
It said 247 passengers and 10 crew members were killed and that most of the victims are soldiers and their relatives.
Footage captured by witnesses shows black smoke coming off the wreckage of the aircraft in a field.
Hundreds of ambulances and dozens of fire trucks converged around the area after the crash.
The flight had just taken off from Boufarik, southwest of the capital Algiers, heading for a military base. It was scheduled to make a layover in Tindouf in southern Algeria, home to many refugees from the neighbouring Western Sahara, a disputed territory annexed by Morocco.
Algerian state news agency said the Soviet-designed Il-76 plane was headed for Bechar in southwest Algeria.
The Il-76 model has been in production since 1970s and has an overall good safety record. It is widely used for both commercial freight and military transport.
The Algerian military operates several of the planes.
In February 2014, 77 people died when a military plane carrying army personnel and family members crashed between Tamanrasset in southern Algeria and the eastern city of Constantine.
The C-130 Hercules transport aircraft came down in the mountainous Oum El Bouaghi region.
In July 2014 an Air Algerie passenger plane flying from Burkina Faso to Algiers crashed in northern Mali, killing all 116 people on board including 54 French nationals.