Nine adults and 37 children were inside the one-storey wooden building when the fire started during the children's' afternoon nap.
By the time firefighters arrived at the scene, the building was completely in flames, rescuers said.
The cause of the blaze has not yet been established.
Social Affairs Minister Hanno Pevkur said fire safety and alarm systems at the home had last been checked last month.
Mourning declared
The Estonian government has met for an emergency meeting and declared Monday a nationwide day of mourning.
"The tragic accident in the Haapsalu orphanage shocked the whole of Estonia today," Estonian President Toomas Hendrik Ilves said in a brief statement.
Most of the children in the home used wheelchairs and were unable to escape the rapidly spreading flames, rescuers said.
Estonian newspaper Postimees showed pictures of victims being carried out from a window, as thick smoke billowed from the roof.
Firefighters took two hours to bring the blaze under control, local media report.
Other children were evacuated to a nearby building.
The orphanage was opened as a home for disabled children in 1950, according to its website.
source : bbc.co.uk
source : bbc.co.uk
