Officials said one person on the ground was killed and two were injured.
It was the deadliest U.S. crash since a Comair commuter jet went down in Kentucky three years ago, claiming 49 lives.
Continental Airlines Flight 3407 plunged into the heart of little Clarence Center about 10:20 p.m. while heading for Buffalo Niagara International Airport about 10 miles away.
The Q400 Dash 8 Turboprop was still burning more than three hours after it flattened a home.
Dave Bissonette, the town's natural disaster services coordinator, said it was "clearly a direct hit."
There was no Mayday, "and very little if any communication" between the plane and the airport, officials said.
"I was told it simply dropped off the radar screen," said an official.
CNN has listened to a tape of communications between air traffic control and the flight crew. The first officer had no sign of stress in her voice initially. The plane was cleared for approach. About two minutes later, the air traffic controller came back, with stress in his voice. Radar contact was lost.
The question went out: Can other planes see anything? No one responds. The controller says they might have a plane down. The pilot's last comment was "Colgan Flight 3407." There were no sounds of distress.
The plane crashed about 10:20 p.m., in Clarence Center, New York. Authorities said the plane went down near a local fire hall, so firefighters were quick to respond to the accident scene.
Area resident Keith Burtis said he was driving to the store about a mile from the crash site when he heard the plane go down.
Brendan Biddlec, who lives about two blocks from the crash site, said he heard an unusual and "eerie, buzzing sound, and then two seconds later, there was a huge explosion and the foundation of our house shook."
Erie County Executive Chris Collins said about a dozen nearby homes suffered damage and were evacuated.
Flight 3407 left Newark about two hours late and was due to land at the Buffalo airport at 10:48p.m., officials said.
"It was a high-pitched sound," Burtis said. "It felt like a mini-earthquake.
Although there was a mix of snow and sleet falling in a light fog, officials said visibility was about 3 miles and there was little wind, so the weather didn't seem to be a factor.
Clarence Center residents said planes often fly over the area, which is directly in front of the Buffalo airport's main runway. But the doomed plane came in loudly and lower than normal before it hit the house with a loud bang.
Shortly after the crash, Burtis said he saw a steady stream of fire trucks rush by him as smoke billowed into the sky. Other witnesses told CNN they saw the plane nose-dive toward the ground.
According to the Buffalo News newspaper, one of the crash victims, Beverly Eckert, was the widow of 9/11 terror attack victim Sean Rooney, a Buffalo native. Eckert was traveling to Buffalo for a weekend celebration of what would have been her husband's 58th birthday.
She also had planned to take part in presentation of a scholarship award at Canisius High School that she established in honor of her late husband, the newspaper reported.
Her sister, Sue Bourque, said that while the family had not yet received official confirmation of her sister's fate, the reality was settling in. "We know she was on that plane," Bourque told the newspaper, "and now she's with him."
Twelve residents were evacuated from the area of the plane crash. Law enforcement officials are asking people not to go to the crash site in fear they may hinder the investigation.
"I felt the impact ... sounded like a large explosion," said Brendan Biddlecon, who told CNN he lives two blocks from where the plane crashed. Watch report from witness: "All I saw was flames" »
Biddlecon ran out his home and to within a couple hundred yards of the crash. The smoke was thick and acrid, and the heat was intense, he said. Are you on the scene? Let us know
"This is clearly a tragedy," said Dave Bissonette, the town's natural disaster services coordinator.
The Erie County Medical Examiner's Office established a command post at the scene and had investigators there, a statement from the office said. Officials said relatives of passengers aboard the flight should call 1-800-621-3263 for information.
A statement from the airline said: "At this time, the full resources of Colgan Air's accident response team are being mobilized and will be devoted to cooperating with all authorities responding to the accident and to contacting family members and providing assistance to them."
Continental Airlines confirmed that the Bombardier Dash 8 Q400, a 74-seat turboprop, was operating between Newark Liberty International Airport and Buffalo.
"Confidence in the Q400 has diminished considerably and our customers are becoming increasingly doubtful about flying in this type of aircraft," Mats Jansson, president and CEO of SAS, said at the time. "I have decided to immediately remove Dash 8 Q400 aircraft from service."
The National Transportation Safety Board said early Friday that was preparing a "go team" to head to Buffalo to investigate the crash.
According to the National Weather Service weather observation for Buffalo, there was light snow, fog and mist shortly before 10 p.m.
At this time, officials said they are not concerned about a hazardous materials situation on the ground.
"Our thoughts and prayers are with the families of the crew, the passengers and our residents on Long Street," said Clarence Supervisor Scott Blylewski.
Thursday's plane crash is the deadliest on U.S. soil since August 2006 when Comair Flight 5191 crashed when it attempted to take off from the wrong runway.
Rep. Chris Lee, R-New York, issued a statement: "We are deeply shocked and saddened by the tragic accident that occurred tonight in Clarence. Our focus right now is on supporting the first responders on the ground and their efforts to ensure the health and safety of people in the area.
"I will do my best to provide helpful information as we learn more. Our thoughts and prayers are with the victims' families at this difficult hour."A woman and her daughter said to be living in the house hit by the plane made it out uninjured and were at a neighbor's home. It was unclear what happened to a man who lived there, too.
"The house is gone. Totally gone," neighbor Kelly Simkin told a local news station. "We really think it only landed on one house."
"It was just like a movie. You just saw the explosion. ... It's unbelievable. My heart is still in my throat. I'm still shaking."
Witness Bob Dworak, 52, was at his home around the corner when he heard the blast and felt his home shake.
"We opened the door - you could smell smoke - and the sky was all lit up," Dworak said. "It looked like the house had just been completely leveled, and there were probably flames 50 or 100 feet up in the air."
"It's pretty scary," he added. "We've always worried that one day one is going to go down and land in the neighborhood."
Although officials declined for hours to say how many fatalities there were, the scope of the disaster was evident much earlier.
A nurse at Erie County Medical Center said the hospital's second shift had been told to stay late to treat survivors but was sent home before midnight.
"There were no souls to bring in and treat," she said.
Chris Kausner, the brother of one victim, was heading to the airport to pick up his sister Elise, a 24-year-old law school student, when he heard about the crash.
He called his parents who were vacationing in Florida, a call he'll always remember.
"I heard my mother make a noise on the phone I've never heard before," he said
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