The discovery at St. Rita's Nursing Home in lower St. Bernard Parish came as 25,000 body bags arrived at the Louisiana Department of Health and Hospitals.
Early Thursday, the official death toll along Gulf Coast from Hurricane Katrina stood at 294, but that number is expected to rise dramatically.
Mortuary teams with refrigerated trucks began arriving Wednesday at the nursing home, where St. Bernard Parish Sheriff Jack Stevens said "30-plus" bodies were found. Between 40 and 50 other people were rescued from the facility, Stevens said.
The parish is east of New Orleans, where between 10,000 and 15,000 people are believed to remain in the flooded city, and thousands are feared dead.
Deputies reported that floodwaters had reached a height of eight feet in some parts of St. Bernard. The nursing home was still surrounded by about three feet of water on Wednesday, as authorities began removing bodies.
Throughout New Orleans and its surrounding parishes, National Guard troops were going house to house to search for survivors and recover the dead -- marking the houses they searched with an "X" to avoid duplication, said Brig. Gen. Michael Fleming, commander of a Florida unit dispatched to New Orleans.
FEMA set up a temporary morgue in the town of St. Gabriel, about 70 miles west of New Orleans.
Another temporary morgue is set up at the intersection of Interstates 10 and 610 inside the city, FEMA spokesman Bill Lehman said.