Syria's military denied the accusation in a statement. The army "denies using any toxic or chemical agents in Khan Sheikhoun today, and it did not and never will use it anywhere", read the statement.
Airstrikes continued last night.
Meanwhile, US President Donald Trump called the attack "reprehensible", and blamed the Syrian Government, but noted that the Damascus would not feel able to launch such attacks had former US President Barack Obama punished it for similar attacks in the past.
At the same time, Trump's Secretary of State, Rex Tillerson, said countries such as Iran and Russia, which have supported Assad, should acknowledge his "brutal, unabashed barbarism".
The latest death toll data came from the Union of Medical Care and Relief Organisation (UOSSM). It also counted 400 wounded and noted that its own medical staff "were affected by the attack, and rushed to the ICU, while treating patients".
A US official stressed the incident was still under investigation, but "if it is what it looks like, it is clearly a war crime". A few hours after the first attack, planes launched fresh airstrikes targeting medical facilities in Khan Sheikhoun.
The raids "came hours after a massacre was committed by fighter jets in the city", Abdel Rahman added.
"Most of the people inside the town have moved to the outskirts because raids are still targeting heavily," Abu Majd, an activist in the city, told dpa by phone.
The first raids took place near a bakery near the northern entrance of Khan Sheikhoun, Majd said.
"People cannot approach the area without masks, and we do not have masks," Majd added.
The Observatory said Turkey opened the Bab al-Hawa crossing on the Syrian-Turkish border and began allowing the wounded in.
The Observatory added that planes also targeted the northern Idlib towns of Jisr al-Shoghor and Salqeen, closer to the borders with Turkey, killing 18 people.
The Syrian National Coalition described the attack as a "massacre" and called for a United Nations Security Council emergency meeting, echoing calls from France and Britain. A meeting was set for today. UN agencies had also begun investigating the reports.
Assad's regime has been accused of using chemical weapons several times since the civil war began in 2011, including in an attack on the area of Ghouta, near Damascus, with the chemical agent sarin. More than 1400 died in the 2013 incident.
In 2014, the Organisation for the Prohibition of Chemical Weapons (OPCW) said Syria handed over its declared stockpile of chemical weapons.
In March, UN investigators said Syrian security forces attacked civilians with chlorine gas in Aleppo late last year, one day after China and Russia vetoed new sanctions against Syria for its use of chemical weapons.
Tillerson was blunt in his assessment of Syria's role.
"Anyone who uses chemical weapons to attack his own people shows a fundamental disregard for human decency and must be held accountable."
- dpa