The bus was carrying more than 50 children ages four to six when it was hit near al-Mandara village in Manfaloot district in the province of Assiut, a security official said. He said it appeared that the railroad crossing was not closed as the train sped toward it.
Egypt's railway system has a poor safety record, mostly blamed on decades of badly maintained equipment and poor management.
Books, school bags and children's socks were strewn along the tracks near the blood-stained, mangled bus. Parents of the missing wailed as they looked for signs of their children. An Associated Press reporter at the scene said many of the remains were unrecognizable.
A woman who called herself Um Ibrahim, a mother of three, was pulling her hair in distress. "My children! I didn't feed you before you left," she wailed. One witness said the train pushed the bus along the tracks for nearly a kilometer (half mile).
As one man picked up a body part he screamed: "Only God can help!" Two hospital officials said between seven and 11 wounded were being treated in two different facilities, many with severed limbs.
All officials spoke on condition of anonymity because they were not authorized to talk to the media.
Accidents traced to negligence regularly left scores dead during the rule of ousted President Hosni Mubarak, who was accused of valuing loyalty over competence in many appointments of senior officials. Widespread corruption under his three decades in power has also been blamed for the underfunding of government services, particularly in poor provinces outside Cairo.
The railway's worst disaster took place in February 2002 when a train heading to southern Egypt caught fire, killing 363 people. Media reports quoted official statistics saying that the rail and road accidents claimed more than 7,000 lives in 2010.
This is the worst such tragedy since the country's first freely elected president, Mohammed Morsi, took office this summer. Egypt's Transport Minister Mohammed el-Meteeni resigned in the wake of the crash, the state news agency reported, but some activists have accused Morsi of continuing the mistakes of his predecessor.
Morsi said in a short televised address from his office that he had tasked the state prosecutor with investigating the crash. "Those responsible for this accident will be held accountable," he said.
But some activists who helped engineer last year's uprising against Mubarak said that government negligence toward citizens is no longer acceptable.
"President Mohammed Morsi is responsible and must follow up personally," one such movement, the April 6 group, said in a statement. "He is the one who chose this failed government whose disasters increase day after day."
In a heated discussion on one of the state-owned radio stations, callers and the presenter expressed outrage and demanded an immediate overhaul and modernization of the train system. Like most government bodies, employees at the Ministry of Transportation complain of poor pay and poor working conditions.
Earlier this week, metro workers went on strike to protest their working conditions, inadequate equipment and management.
Saturday's accident comes one week after two trains collided in another southern province, killing four people. Some of the country's train accidents are blamed on an outdated system that relies heavily on switch operators instead of assistance from technology.
Residents in Assiut complained that there were not enough ambulances in the area that could respond quickly enough and that the ambulances themselves were ill-equipped to deal with the emergency.
At al-Mandara village, angry families and locals gathered near the tracks, shouting at officials. Some chanted: "Down with Morsi!"
Sheik Mohammed Hassan, a villager, said the government should be paying more attention to its domestic problems instead of focusing its attention to the violence in neighboring Gaza.
"The blood of people in Assiut is more important than Gaza," he said.