The blaze broke out at the Lee Gardens Hotel in downtown Hat Yai, which is a popular destination with tourists from neighbouring Malaysia and Singapore.
Four men and one woman died in the fire, Songkhla provincial governor Grisada Boorach told AFP. He said 336 were injured, of whom 28 were in hospital.
The cause of the fire was being investigated, the governor said.
City mayor Prai Pattano earlier said the fire was apparently caused by a gas explosion in the basement of the building.
Prai also said more than 300 were injured but most were not seriously hurt and had been discharged.
Most of those injured suffered from smoke inhalation, many in the hotel's large shopping arcade.
Police Lieutenant Phuvadol Viriyanarangkul said foreign tourists were among those injured but there were no details on them so far.
Two Russian tourists were killed in a fire at a hotel in Bangkok earlier this month.
Thailand is a tourist magnet but its image as the "Land of Smiles" has been tested in recent years by deadly political unrest, devastating floods and more recently a bungled bomb plot involving Iranian suspects.