An AFP video reporter filmed the inmates as they stood with flags on the partly destroyed red tile roof of the Alcacuz jail near the northeastern city of Natal.

Police stormed the prison on Sunday morning and ended a night-long riot. They found 26 prisoners dead, most of them beheaded, officials said.

It was the third major massacre to hit Brazil's overcrowded jails this month, all of them involving suspected drug gangs.

Officials said two rival gangs clashed in the overcrowded Natal jail.

Gruesome violence at a prison in the northwestern city of Manaus killed about 60 inmates on January 1. A further 33 died in a riot in Roraima state on January 6.

The Natal massacre which erupted on Saturday raised fears that the wave of violence could spread.

President, Michel Temer said on Twitter that the federal government stood ready to provide "all assistance necessary."

At Alcacuz, security forces surrounded the prison after violence broke out but had to wait until first light Sunday to storm the site with armored vehicles, officials said.

Prisoners had cut off the electricity and were said to have firearms.

The prison was built for a maximum of 620 inmates but currently houses 1,083, the state justice department said.

The riot was thought to have been a clash between Brazil's biggest drug gang, the First Capital Command, and a group allied to its main rival Red Command, Brazilian media said.

Experts say the violence is part of a war between drug gangs battling for control of one of the world's most important cocaine markets and trafficking routes.