The Syrian military denied responsibility and said it would never use chemical weapons.
The head of the health authority in rebel-held Idlib said more than 50 people had been killed and 300 wounded. The Union of Medical Care Organizations, a coalition of international aid agencies that funds hospitals in Syria, said at least 100 people had died.
The British-based Syrian Observatory for Human Rights said the attack killed at least 58 people and was believed to have been carried out by Syrian government jets. It caused many people to choke, and some to foam at the mouth.
Director Rami Abdulrahman told Reuters the assessment that Syrian government warplanes were to blame was based on several factors such as the type of aircraft, including Sukhoi 22 jets, that carried out the raid.
"We deny completely the use of any chemical or toxic material in Khan Sheikhoun town today and the army has not used nor will use in any place or time neither in past or in future," the Syrian army command said in a statement.
The Russian Defence Ministry said its aircraft had not carried out the attack. The U.N. Security Council was expected to meet on Wednesday to discuss the incident.
Reuters photographs showed people breathing through oxygen masks and wearing protection suits, while others carried the bodies of dead children, and corpses wrapped in blankets lined up on the ground.
Activists in northern Syria circulated pictures on social media showing a man with foam around his mouth, and rescue workers hosing down almost-naked children squirming on the floor.
Mounzer Khalil, head of Idlib's health authority, said hospitals in the province were overflowing with victims.
"This morning, at 6:30 a.m., warplanes targeted Khan Sheikhoun with gases, believed to be sarin and chlorine," he told a news conference.
Warplanes later struck near a medical point where victims of the attack were receiving treatment, the Observatory and civil defense workers said.
The civil defense, also known as the White Helmets - a rescue service that operates in opposition areas - said jets struck one of its centers in the area and the nearby medical point.
The incident reported at Khan Sheikhoun would be the deadliest chemical attack in Syria since sarin gas killed hundreds of civilians in Ghouta near Damascus in August 2013. Western states said the Syrian government was responsible for that attack. Damascus blamed rebels.
The White House called the attack an "intolerable act" and said President Donald Trump was alarmed by the reports. French President Francois Hollande directly blamed Syrian government forces and said President Bashar al-Assad's allies were emboldening him to act with impunity.
Assad has enjoyed staunch military backing from Iran and Russia in the war.
Britain said he would be guilty of a war crime if it were proved his regime was responsible. The U.N. envoy for Syria said the "horrific" chemical attack had come from the air.
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A series of investigations by the United Nations and the Organization for the Prohibition of Chemical Weapons (OPCW) found that various parties in the Syrian war had used chlorine, sulfur mustard gas and sarin.
A joint U.N.-OPCW report published in October said government forces used chlorine in a toxic gas attack in Qmenas in Idlib province in March 2015. An earlier report by the same team blamed Syrian government troops for chlorine attacks in Talmenes in March 2014 and Sarmin in March 2015. It also said Islamic State had used sulfur mustard gas.
The OPCW said it had begun "gathering and analyzing information from all available sources" about the suspected Khan Sheikhoun attack.
Turkey, which backs the anti-Assad opposition, said the attack could derail Russian-backed diplomatic efforts to shore up a ceasefire.
Turkey's state-run Anadolu news agency said 15 people hurt in the attack, mostly women and children, had been taken to Turkey.
Footage from Turkey's Dogan news agency showed at least four people being brought out of ambulances on stretchers in the Turkish border town of Reyhanli by medical staff wearing face masks. One was a young boy.
An official at the Turkish Health Ministry said Turkey's disaster management agency was first "scanning those arriving for chemical weapons, then decontaminating them from chemicals" before they could be taken to hospital.
Idlib province contains the largest populated area controlled by anti-Assad rebels - both nationalist Free Syrian Army groups and powerful Islamist factions including the former al Qaeda-linked Nusra Front.
Turkish President Tayyip Erdogan and Russian President Vladimir Putin discussed the suspected attack, Turkish presidential sources said. They said the two leaders had also emphasized the importance of maintaining the much-violated Syrian ceasefire.
Idlib's population has ballooned, with thousands of fighters and civilians shuttled out of Aleppo city and areas around Damascus that the government has retaken in recent months as Assad has gained the upper hand in the war.
The United States has also launched a spate of air strikes in Idlib this year, targeting jihadist insurgents.
Following the 2013 attack, Syria joined the international Chemical Weapons Convention under a U.S.-Russian deal, averting the threat of U.S.-led military intervention.
Under the deal, Syria agreed to give up its toxic arsenal and surrendered 1,300 tonnes of toxic weapons and industrial chemicals to the international community for destruction.
U.N.-OPCW investigators found, however, that it continued to use chlorine, which is widely available and difficult to trace, in so-called barrel bombs, dropped from helicopters.
Although chlorine is not a banned substance, the use of any chemical is banned under 1997 Chemical Weapons Convention, to which Syria is a member.
Damascus has repeatedly denied using such weapons during the six-year war, which has killed hundreds of thousands and created the world's worst refugee crisis.