The fire broke out before dawn at the budget Hotel Arpit Palace in a congested part of central Delhi.
According to the fire department, seven men, a woman and child died in the blaze.
G.C. Misra, Delhi fire brigade director, said the blaze had been brought under control and that 35 people were rescued by firefighters in an operation lasting several hours.
Fire Officer Vipin Kental said, "The cause of the fire yet to be investigated".
"There was wooden panelling on corridors because of which people could not use corridors to evacuate", another fire officer told reporters.
The inferno was reported in the early hours of Tuesday, with videos showing the top floors of the building consumed by flames.
Karol Bagh, filled with shops and budget hotels, is popular with tourists.
The injured were taken to hospitals, but their medical conditions were not immediately known.
Frequent raids by civic authorities to enforce building codes, fire safety measures and evacuation procedures in New Delhi have failed to curb violations in this rapidly expanding city of more than 18 million people. Most of the 53 people in the 65-room hotel were sleeping at the time, the staff said.
Accidental fires are common across India because of poor safety standards and lax enforcement of regulations. Thirteen bodies are at the RML Hospital, a senior doctor said.
"Investigation is on. Strict action will be taken against the guilty", Delhi minister Satyendar Jain, who visited the site, said.
The hotel comprises of basement, ground floor and four other floors.
Reportedly, the reason behind the fire was the short circuit on the 4th floor of the hotel.
Fire fighters searched rooms and toilets to ensure that no one was left trapped, Mishra said. Seventeen people have died, majority of suffocation.