The truck veered off the road when the driver lost control, police official Mohammad Akhtar told CNN. As the tanker sat on the side of the road, fuel began leaking out in large pools.
Many victims died immediately, while others succumbed to their injuries at hospitals.
The explosion happened Sunday morning as hundreds of people from nearby villages, as well as workers at a mango garden -- many of them driving cars or motorcycles -- rushed to collect the fuel in pots, according to APP
Nishtar Hospital, where many of the wounded were taken, said more than 100 people were injured in the blast. Bahawal Victoria Hospital said it was treating 40 victims, all of whom had suffered burns on at least 70% of their bodies.
Bahawalpur Victoria Hospital Dr. Javed Iqbal told CNN the death toll had risen to 153 people as of Monday afternoon.
At the scene of the blast, photos showed the tanker surrounded by the husks of burned-out motorbikes and automobiles, their windows and tires melted away from the heat.
According to APP, the explosion destroyed 75 motorbikes and six automobiles. Bodies were pulled from cars and a motorcycle rickshaw.
A state of emergency was declared in Bahawalpur, Punjab provincial government spokesman Salman Sufi said.
Police speculate on cause
It's not known what cause the wreck to ignite, but some people gathering at the scene began smoking cigarettes and using their cell phones to inform friends and relatives of the crash.
"Sparking from cell phones could ignite fire," Haroon-ur-Rasheed, a former police official who now handles emergency and rescue operations in Bahawalpur, told the APP.
He added the tanker also was fitted with batteries that could have sparked the blaze.
Officers with the National Highways and Motorway Police urged villagers to stay away from the vehicle, but to no avail, police sources told APP.
The tanker was carrying 25,000 liters (6,600 gallons) of fuel from Karachi to Lahore, roughly 440 kilometers (273 miles) northeast of Bawalpahur.
Images from the scene showed the truck overturned with a gaping hole atop the tanker where the blast had ripped open.
Mohammad Shabbir, a villager, told CNN affiliate Geo TV that the vehicle's driver had warned people to stay away from the truck but his warnings were not heeded.
"What is the use of this petrol? What will you do with it now?" he asked, gesturing towards a bucket in his hand.
Pakistan's Inter-Services Public Relations, the media wing of Pakistan's military, said army helicopters transported 51 people 60 miles (97 kilometers) north to Combined Military Hospital Multan. They're all in critical confiction, ISPR said.
It added that the road had been reopened and that traffic had started to flow again.
Shortly after the accident, Pakistan Prime Minister Muhammad Nawaz Sharif "expressed deep grief over the heavy loss of life."
"The Prime Minister has directed provincial government to provide full medical assistance to the injured with burns," a statement from his office said. "The Prime Minister has expressed sympathies with the bereaved families and prayed for the departed souls."
Amid criticism that the government has failed to respond adequately to the tragedy, the prime minister's daughter tweeted that Sharif would cut short his trip to London and return to Pakistan immediately. He was in London for his grandson's graduation ceremony, Maryam Nawaz Sharif tweeted.
Chief Minister of Punjab Muhammad Shehbaz Sharif has said an inquiry will be held into the incident.
Imran Khan, chairman of the Pakistan Tehreek-e-Insaf party, tweeted that the blaze was "a national tragedy of epic proportions."
The politician and former cricketer said he had asked local leadership to assess what assistance could be provided to the injured and victims' families.
The US Embassy in Islamabad tweeted its condolences
"We are so saddened to hear of the terrible oil tanker accident in #Bahawalpur," it said. "Our deep condolences to the families and loved ones of the victims."