The authorities fear the number of casualties may rise when all the rubble is removed and some people are thought to be missing.
Dozens of fire fighters were called to the scene in the early hours of the morning as the bar's occupants struggled to escape the blaze.
The authorities fear the number of casualties may rise when all the rubble is removed and some people are thought to be missing.
City official Dolores Padierna told the BBC that the club did not meet safety requirements.
No fire escape
The Lobohombo discotheque was thought to be one of the biggest in Mexico, with up to 3,000 visitors per night.
The authorities estimate that there were some 1,000 clubbers in the two-storey building at the time of the fire.
Witnesses reported hearing several explosions and the blaze soon spread to a neighbouring buildings.
The cause of the fire, which was put out before dawn, is being investigated.
Ms Padierna said that the building did not comply with health and safety regulations.
"The club did not have an emergency exit and their electrical and gas connections did not comply with the law", she said.
The bar had been closed by authorities in 1997 because of safety, security and administrative issues.
It was later allowed to remain open under a series of court injunctions won by the owners.
Earlier this year, the authorities had tried to close the club because it did not have a permit for table dancing.
But the owner had obtained a federal court injunction to remain open.
Ms Padierna is campaigning to shut down illegal nightclubs in the area where the fire occurred.