Rescue personnel have located the body of the third and final victim from a hot air balloon that burst into flames in the US state of Virginia.

Witnesses watched in horror on Friday as the balloon caught fire in the sky after hitting a power line as it was coming down into a pre-designated field near the city of Richmond.

The burning balloon then surged back up, before plummeting down again and smashing into the ground.

The balloon and gondola separated at some point, witnesses said, and the pilot had attempted to fight the fire while flying the balloon.

Two of the three people aboard were already confirmed dead and their bodies found.

More than 100 personnel were involved in today's search of a large swath of land that included a heavily wooded area.

The rest of the two-day Mid-Atlantic Balloon Festival was cancelled after the crash.