The C-130 Hercules transport aircraft took off from Punta Arenas at 16:55 local time (19:55 GMT), and operators lost contact soon after 18:00 (21:00).
Among the missing are 17 crew members and 21 passengers, who were travelling to provide logistical support.
Chile's air force said a search and rescue operation is under way to recover the plane and those missing.
News agency EFE reports that three of those on board are civilians.
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