Scores were killed in the crush at a football stadium in Malang, East Java. Photo: AFP
The stampede happened after police tear-gassed rioting supporters after Arema FC lost to bitter rivals Persebaya Surabaya in East Java on Saturday.
As panic spread, thousands surged towards Kanjuruhan stadium's exits, where many suffocated.
Some local officials had put the death toll at 174, but East Java Deputy Governor Emil Dardak said the number of fatalities had subsequently been revised down to 125. The earlier figure may have included duplicate fatalities, he said.
An East Java police spokesperson said 323 people were injured, up from the initial count of 180.
President Joko Widodo has ordered that all matches in Indonesia's top league must be stopped until an investigation has been carried out.
Fifa, the world's governing football body, states that no "crowd control gas" should be carried or used by stewards or police at matches.
One eyewitness told the BBC that police had fired numerous tear gas rounds "continuously and fast" after the situation with fans became "tense".
Fifa President Gianni Infantino said it was "a dark day for all involved in football and a tragedy beyond comprehension".
The country's chief security minister said the number of spectators exceeded the stadium's capacity by around 4000 people.
Videos from the stadium show fans running on to the pitch after the final whistle marked the home team's 2-3 defeat.
Police then fired tear gas, leading to a crowd stampede and cases of suffocation, said Nico Afinta, police chief in East Java.
"It had gotten anarchic. They started attacking officers, they damaged cars," he said, adding that two police officers were among the dead.
"We would like to convey that... not all of them were anarchic. Only about 3000 who entered the pitch," he said.
Fleeing fans "went out to one point at the exit. Then there was a build-up, in the process of accumulation there was shortness of breath, lack of oxygen", he added.
Videos on social media show fans clambering over fences to escape. Separate videos appear to show lifeless bodies on the floor.
Police fired tear gas after fans ran on to the pitch following the final whistle. Photo: PUTRI/ AFP
The Indonesian football association (PSSI) said it had launched an investigation, adding that the incident had "tarnished the face of Indonesian football".
Violence at football matches is not new in Indonesia, and Arema FC and Persebaya Surabaya are long-time rivals.
Persebaya Surabaya fans were banned from buying tickets for the game because of fears of clashes.
But Chief Security Minister Mahfud MD posted on Instagram that 42,000 tickets had been sold for the match at the Kanjuruhan stadium, which has a capacity of 38,000.
President Widodo called for this to be the "last soccer tragedy in the nation" after ordering that all Liga 1 games should be paused pending an investigation.
The stampede is the latest in a long line of disasters at stadiums.
In 1964, a total of 320 people were killed and more than 1000 injured during a stampede at a Peru-Argentina Olympic qualifier in Lima.
In the UK, 96 Liverpool fans were crushed to death in 1989 at the Hillsborough Stadium in Sheffield.
- BBC / Reuters