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A woman cries as she visits the disaster site following a huge fire at Nimtali, Dhaka, Bangladesh on Friday. The death toll rose to 117 while more than 150 injured were being treated at hospitals. Image Credit: EPA

Dhaka: The national flag flew at half-mast and people of all faiths joined prayers as Bangladesh on Saturday mourned the deaths of nearly 120 people in the country's deadliest blaze.

The fire raged for three hours late on Thursday, destroying at least six multi-storey apartment buildings, one of which was hosting a wedding party, and gutting a string of small shops in one of Dhaka's most densely populated areas.

At least 117 people have died in the inferno but officials feared the toll would rise as dozens of critically injured patients lay fighting for their lives in Dhaka's overstretched hospitals.

"Some 40 patients are being treated at two main hospitals. They are in critical condition," said Dhaka's district administrator Muhibul Haque.

Haque said the government had launched an investigation into the blaze, which firefighters said was fuelled by an illegal chemicals warehouse.

"The chemicals warehouse was illegally set up in the residential area. We are looking for its owner," Haque said. "We will find the culprits and take action."

The fire began when an electrical transformer exploded, with the flames spreading rapidly to a warehouse next door which was illegally storing powerful glue used to manufacture shoes.

Hundreds of people were trapped as rescue workers struggled to contain the blaze, their work hampered by the narrow lanes of the crowded residential area and the choking, toxic smoke.

Special prayers were being held in mosques, temples and churches across the Muslim-majority country, and Bangladesh's green and red flag fluttered at half-mast as part of a day of national mourning.

Prime Minister Sheikh Hasina has visited the injured and announced compensation and free treatment for the victims.

Fires due to short-circuits, substandard wiring and electrical faults are common in Bangladesh, where building regulations are rarely enforced.