Some of the casualties were airlifted to hospitals in Germany and Belgium after specialist burns units in Dutch hospitals were unable to cope.
At least nine young people died and up to 180 were hurt. Doctors expect the death toll to rise as some of the injured succumb to third degree burns and smoke inhalation.
Some reports say sparklers lit by the revellers set light to Christmas tree branches and other festive decorations, but other witnesses have said fireworks were to blame.
A number of people were injured jumping from third-storey windows to escape the smoke and flames. Partygoers described being plunged into darkness as panic spread through the venue.
Some of the casualties were airlifted to hospitals in Germany and Belgium after specialist burns units in Dutch hospitals were unable to cope.
The Volendam fire chief, Jan Schouten, said temperatures on the cafe ceiling had reached 800C to 1,000C, and that the decorations which had been used on the ceiling had been mostly Christmas tree branches.
The authorities also say they had written to all bar and club owners before Christmas asking them to use only flame-proof decorations.
A town spokesman, Cor Kwakman, said the fire had been short but intense.
"There was a lot of panic... The smoke was very thick. We heard people were walking over each other," he said
Many people who were burned had been wearing highly flammable synthetic fabrics.
"It was a night of terror," said the town's mayor, Frank Ijsselmuiden.
"I saw disorientated youngsters with fear in their eyes. I watched as one of those youngsters died."
Mr Ijsselmuiden said the blaze had been brought under control quickly, but attending to the injured had taken far longer.
Panic
Revellers described how the celebration turned to terror.
"I was partying with my mates and all of a sudden, 'Boom'," said one.
"In one second, everything vanished. You couldn't see a thing."
"It was like warfare, people screaming and trampling over each other to get out," said Henk Jong, who ran from a nearby bar to help the injured.
In television footage from the scene, one injured man could be heard moaning "panic, panic, everywhere panic", as his stretcher was loaded into an ambulance.
Tight-knit community
Volendam is a small fishing town 15km (10 miles) from Amsterdam on the Ijsselmeer - an inland lake linked to the North Sea.
Residents say the effects of the tragedy will be felt in the village for years, as the dead and injured were nearly all local people.
One man said New Year in Volendam would always be a time of terrible memories.
A list of the dead is expected to be released on Tuesday.