The army said the plane crashed in Sanosware in Mustang district close to the mountain town of Jomsom where it was heading after taking off from from the resort town of Pokhara, 200 kilometers (125 miles) west of Kathmandu.
An aerial photo the army posted on Twitter of the crash site showed parts of the aircraft scattered around the mountainside.
No other details were given.
The search for the plane had been suspended due to bad weather and darkness Sunday night but resumed Monday.
According to tracking data from flightradar24.com, the 43-year-old aircraft took off from Pokhara at 9:55 a.m. (04:10 GMT) and transmitted its last signal at 10:07 a.m. (04:22 GMT) at an altitude of 12,825 feet (3,900 meters).
Four Indians and two Germans were on the plane. The three crew members and other passengers were Nepali nationals.
The plane’s destination is popular with foreign hikers who trek the mountain trails and also with Indian and Nepalese pilgrims who visit the revered Muktinath temple.
The Twin Otter, a rugged plane originally built by Canadian aircraft manufacturer De Havilland, has been in service in Nepal for about 50 years, during which it has been involved in about 21 accidents, according to aviationnepal.com.
The plane, with its top-mounted wing and fixed landing gear, is prized for its durability and its ability to take off and land on short runways.
Production of the planes originally ended in the 1980s. Another Canadian company, Viking Air, brought the model back into production in 2010.