The plane, piloted by 74-year-old Jimmy Leeward, spiraled out of control without warning and appeared to disintegrate upon impact. Bloodied bodies were spread across the area as people tended to the victims and ambulances rushed to the scene.
Authorities were investigating the cause, but an official with the event said there were indications that mechanical problems were to blame.
Maureen Higgins of Alabama, who has been coming to the air races for 16 years, said the pilot was on his third lap of a race when he lost control.
She was sitting about 30 yards from the crash and watched in horror as the man in front of her started bleeding after debris hit him in the head.
"I saw body parts and gore like you wouldn't believe it. I'm talking an arm, a leg," Higgins said "The alive people were missing body parts. I am not kidding you. It was gore. Unbelievable gore."
Among the dead was Leeward, of Ocala, Fla., a veteran airman and movie stunt pilot who named his P-51 Mustang fighter plane the "Galloping Ghost," according to Mike Houghton, president and CEO of Reno Air Races.
Renown Regional Medical Center spokeswoman Kathy Carter confirmed two others died, but did not provide their identities.
Stephanie Kruse, a spokeswoman for the Regional Emergency Medical Service Authority, told The Associated Press that emergency crews took a total of 56 injury victims to three hospitals. She said they also observed a number of people being transported by private vehicle, which they are not including in their count.
Kruse said of the total 56, at the time of transport, 15 were considered in critical condition, 13 were serious condition with potentially life-threatening injuries and 28 were non-serious or non-life-threatening.
"This is a very large incident, probably one of the largest this community has seen in decades," Kruse told The Associated Press. "The community is pulling together to try to deal with the scope of it. The hospitals have certainly geared up and staffed up to deal with it."
The P-51 Mustang, a class of fighter plane that can fly at speeds in excess of 500 mph, crashed into a box-seat area in front of the grandstand at about 4:30 p.m., race spokesman Mike Draper said.
Houghton said at a news conference hours after the crash that there appeared to be a "problem with the aircraft that caused it to go out of control." He did not elaborate.
He said the rest of the races have been canceled as the National Transportation Safety Board investigates.
Tim O'Brien of Grass Valley, Calif., has attended the Reno air races every year since 1973. He said he was photographing the event when he saw the plane pitch violently upward, roll and then head straight down about 100 yards away.
O'Brien said that from the photos he took, it looked like a piece of the plane's tail called a "trim tab" had fallen off, which is what he thinks caused the plane's sudden climb.
O'Brien said the plane hit the ground and "absolutely disintegrated."
"The propeller (was) spinning very fast, and there was a lot of mass coming down all at once," he said. It was "very violent impact."
Afterward, there were a number of people standing around, and "all we could do was hug each other," O'Brien said.
Tim Linville, 48, of Reno, said the pilot appeared to lose partial control off the plane when he veered off course and flew over the bleachers near where Linville was standing with his two daughters.
"I told the girls to run and the pilot pulled the plane straight up, but he couldn't do anything else with it," Linville told the AP. "That's when it nosedived right into the box seats."
Linville said the plane smashed into the ground and shattered like an enormous water balloon, sending shrapnel and debris into the crowd.
"It was just flying everywhere," he said.
Leeward, the owner of the Leeward Air Ranch Racing Team, was a well-known racing pilot. His website says he has flown more than 120 races and served as a stunt pilot for numerous movies, including "Amelia" and "Cloud Dancer."
In an interview with the Ocala (Fla.) Star-Banner last year, he described how he has flown 250 types of planes and has a particular fondness for the P-51, which came into the war relatively late and was used as a long-range bomber escort over Europe. Among the famous pilots of the hot new fighter was WWII double ace Chuck Yeager.
"They're more fun. More speed, more challenge. Speed, speed and more speed," Leeward said.
Leeward talked about racing strategy in an interview Thursday with LiveAirShow TV while standing in front of his plane.
"Right now I think we've calculated out, we're as fast as anybody in the field, or maybe even a little faster," he said. "But uh, to start with, we didn't really want to show our hand until about Saturday or Sunday. We've been playing poker since last Monday. And uh so, it's ready, we're ready to show a couple more cards, so we'll see on Friday what happens, and on Saturday we'll probably go ahead and play our third ace, and on Sunday we'll do our fourth ace."
Houghton described Leeward as a "good friend."
"Everybody knows him. It's a tight-knit family. He's been here for a long, long time," Houghton said.
He also described Leeward as a "very qualified, very experienced pilot" who was in good medical condition. He also suggested Leeward would have made every effort to avoid casualties on the ground if he knew he was going to crash.
"If it was in Jimmy's power, he would have done everything he possibly could," Houghton said.
The National Championship Air Races draws thousands of people to Reno every year in September to watch various military and civilian planes race. They also have attracted scrutiny in the past over safety concerns, including four pilots killed in 2007 and 2008. It was such a concern that local school officials once considered whether they should not allow student field trips at the event.
The competition is like a car race in the sky, with planes flying wingtip-to-wingtip as low as 50 feet off the sagebrush at speeds sometimes surpassing 500 mph. Pilots follow an oval path around pylons, with distances and speeds depending on the class of aircraft.
The FAA and air race organizers spend months preparing for air races as they develop a plan involving pilot qualification, training and testing along with a layout for the course. The FAA inspects pilots' practice runs and brief pilots on the route maneuvers and emergency procedures.
Sen. Harry Reid, D-Nev., and other lawmakers issued statements saying they were saddened by the crash.
"My thoughts are with the families of those who have lost their lives and with those who were wounded in this horrific tragedy," Reid said. "I am so grateful to our first responders for their swift action and will continue to monitor this situation as it develops."