The FBI said they were investigating the possible radical Islamic "leanings" of the suspect, identified by US media as 29-year-old Omar Mateen, a US citizen of Afghan descent.
"This is clearly an act of terror," Florida Governor Rick Scott told reporters, declaring a county-wide state of emergency.
But the suspect's father told NBC news that his son may have been motivated by homophobia and not by his Muslim faith.
"This had nothing to do with religion," Mir Seddique told the network, recalling a recent incident in downtown Miami.
"He saw two men kissing each other in front of his wife and kid and he got very angry," the father said, Apologizing to the victims.
Terrified survivors described how the gunman raked the club with bullets, prompting a police SWAT team to storm the venue and shoot him dead.
Mayor Buddy Dyer told a mid-morning news briefing in Orlando that 50 people had been killed in addition to the shooter, more than doubling the previous toll.
"There are another 53 that are hospitalised," he added. Officials said many of the victims are in critical condition, so the death toll could yet rise.
FBI official Ronald Hopper told reporters officials were "confident" there was no immediate further threat to the area, or to the United States.
Omar Mateen was born to Afghan parents in 1986 and lives in Port St Lucie, Florida, about two hours drive from Orlando. CBS News reported that Mateen has no apparent criminal history. Hopper said authorities were looking into whether the suspect had "leanings" toward Islamic extremism.
Florida officials also invited a local Islamic leader to address the media in a bid to preempt a possible backlash against the Muslim community.
Congressman Michael McCaul, chairman of the House Homeland Security Committee, dubbed the murders "the worst terrorist attack on American soil since 9/11."
The latest mass shooting comes at the height of what is already a heated US presidential election campaign, and the main candidates were quick to react.
Democratic flag-bearer Hillary Clinton tweeted that the attack was "devastating" news and that her "thoughts are with those affected by this horrific act." Her Republican rival Donald Trump, who has called for Muslims to be banned from travelling to the United States, tweeted: "When will this stop?"
"When will we get tough, smart and vigilant?" he demanded.
Events unfolded over a three hour period from at around 2 am (0600 GMT) when shots rang out amid the throbbing music at the Pulse Orlando club near closing time.
Police said the suspect was armed with an assault rifle and a handgun.
A police officer working "extra duties" at the club responded, joined by two other officers, who exchanged fire with the suspect. "The suspect at some point went back inside the club where more shots were fired. This did turn into a hostage situation," police chief John Mina said.
"At approximately 0500 hours (0900 GMT) this morning, the decision was made to rescue hostages that were in there."
Police then stormed the venue, using explosives and breaking through a wall with a wheeled armoured vehicle known as a BearCat. Mina said about 30 people were rescued during the operation and that the police priority now would be to identify the victims and notify next of kin.
It was unclear whether all the victims were killed by the gunman or if some died in the ensuing shootout with police.
The attack coincides with gay pride month in the United States, with festive marches and events being held all over the country including in Orlando last week.
It was the second shooting in the city in just over 24 hours. Singer Christina Grimmie was shot dead Friday by a gunman at a theater after a gig.
Mina said there was no indication of a link between the two shootings.
Speaking to Sky News, clubber Ricardo Negron, who was inside when the shooting began, described how the gunman raked the club with bullets. "People just dropped on the floor. I guess the shooter was shooting at the ceiling because you could see all the glass from the lamps falling," he told the network.
He described hearing "non-stop firing" which probably lasted less than a minute but felt like a lot longer.
"There was a brief pause in the shooting and some of us just got up and ran out the back."
The Pulse club advertises itself online as "Orlando's hottest gay bar." On its Facebook page, the club warned patrons: "Everyone get out Pulse and keep running."
'Blood everywhere'
Witness Christopher Hanson said he heard "loud banging noises, like gunshots going off."
"I didn't see any of the actual shooters. I just saw bodies going down and I was ordering a drink at the bar," he told CNN.
"I fell down. I crawled out. People were trying to escape out the back. I just know that when I hit the ground, I was crawling and I hit my elbows and my knees."
He said there was "blood everywhere."