A total of 32 children under the age of 10 are among 92 people confirmed killed in fighting on a town near the city of Homs.
Activists said Syrian government forces attacked Houla with artillery.
It is the bloodiest loss of life since a ceasefire brokered by the United Nations and the Arab League was put into effect last month.
Confirming the killings, the head of the UN observer mission to Syria, General Robert Mood, in Damascus, told Sky News: "Whichever way you look at this, whoever started and whoever responded and whoever contributed, to this deplorable act of violence should be held responsible.
"This indiscriminate and disproportionate use of force is unacceptable and I would also say unforgivable."
Up to 250 UN observers are in Syria to monitor the ceasefire and a team arrived in the Houla region, which is made up of several villages in the province of Homs, on Saturday.
Gen Mood told Sky it had been impossible to send unarmed observers to the area until the violence subsided.
Amateur videos posted online showed graphic images of dead children lying on a floor. Some were wearing bloody clothes and had severe head wounds.
Another clip showed a mass grave, four bodies wide.
Foreign Secretary William Hague has called for a "strong international response" and said Britain was calling for an urgent session of the UN Security Council.
He said: "Our urgent priority is to establish a full account of this appalling crime and to move swiftly to ensure that those responsible are identified and held to account.
"We are consulting urgently with our allies on a strong international response, including at the UN Security Council, the EU and UN Human Rights bodies."
Earlier, Walid Saffour, from the Syrian Human Rights Committee , said President Bashar al Assad's forces were "continuing their onslaught" in Houla.
"The inaction of the international community helps the Syrian authorities to perpetrate these massacres on a large scale," he told Sky News.
The Syrian government, for its part, blamed the killings on "armed terrorist groups".
UN Secretary General Ban Ki-Moon said: "This appalling and brutal crime involving indiscriminate and disproportionate use of force is a flagrant violation of international law and of the commitments of the Syrian government to cease the use of heavy weapons in population centers and violence in all its forms."
France's foreign minister Laurent Fabius condemned the massacre and said he was "making immediate arrangements for a Friends of Syria group meeting in Paris", and the White House said the attack was a "vile testament to an illegitimate regime".
Meanwhile, the rebel Free Syrian Army (FSA) called for the Friends of Syria group of nations to carry out air strikes on the forces of President Assad.
The FSA has said it is no longer committed to the peace plan negotiated with the Assad regime.
Syria's main opposition bloc has also urged the UN Security Council to convene an emergency meeting to examine what happened in Houla.
"Some of the victims were hit by heavy artillery while others, entire families, were massacred," Bassma Kodmani, of the Syrian National Council, said.
The latest violence comes as tens of thousands of protesters took to the streets, and tanks were reportedly deployed to counter public action after Friday prayers.
For the first time since the uprising against President Assad's regime erupted 14 months ago, army tanks rumbled through Aleppo, the London-based Syrian Observatory said.
