The blaze erupted in the early hours of Tuesday at Hotel Arpit Palace in a congested part of central New Delhi.
A woman and a child died after they tried jumping from a window of the building.
A call was received at 4.30 a.m. from Arpit Palace Hotel and immediately 25 fire tenders were rushed to the spot, the officer at the Delhi Fire Department headquarters told IANS.
Indian Twitter user Vikas Tripathi, sharing the video, wrote: "Death toll likely to rise as people jumped off the building to save themselves". It was extinguished after a three-hour operation, with 35 people rescued. The injured have been taken to the hospital, officials said.
Television showed pictures of flames leaping from the top floor. Those staying in the hotel included a group of tourists from Myanmar, broadcaster NDTV said, adding that authorities were trying to ascertain their whereabouts.
Holy planetesimal formation, Batman! Ultima Thule's no snowman - it's a friggin' pancake
Scientists discovered its snowman-like structure after New Horizons began sending images to us here on Earth. This set, according to NASA, was captured almost 10 minutes after the ship crossed its closest approach.
Unconfirmed reports say the death toll is likely to rise as numerous injured jumped from the burning building to the ground.
A large wedding party had booked out most of the hotel, and most of the victims were sleeping when the fire began.
The Delhi government has, meanwhile, ordered a magisterial probe into the Karol Bagh fire incident, said Health Minister Satyendra Jain.
Map showing New Delhi in India where several people were killed in a hotel fire on Tuesday. The hospital has been functioning without a fire licence that expired over five months ago, officials said.
Authorities appeared to have been negligent in enforcing building laws in the surrounding area, Delhi's urban development minister Satyendar Jain said. "Inside in the rooms, wooden panels were there on the walls", Mr Jain said.