The Lynx helicopter crashed during a routine flight in Kandahar province killing three members of the Army Air Corps, a member of the Royal Air Force and an army reservist with military intelligence who were all on board, the ministry said.
It is the largest single loss of life for the NATO-led International Security Assistance Force (ISAF) since a US helicopter crashed in December after being hit in a Taliban insurgent attack.
Taliban militants said their fighters had shot down the British helicopter, although the insurgent group often makes erroneous claims of responsibility.
"It is with great sadness that we must confirm that five UK service personnel have been killed in this incident which, at this early stage, would appear to have been a tragic accident," said Major General Richard Felton of the British armed forces' joint helicopter command.
"Events like this, whilst mercifully rare, remind us of the risks our personnel face in their work in Afghanistan as we approach the conclusion of the combat mission later this year.
"Our thoughts are with the families and loved ones of those who have lost their lives."
The loss is particularly poignant as it comes just months before British troops withdraw from the country.
Prime Minister David Cameron said his "heart goes out to the families and friends of those killed in this terrible tragedy".
- 'A technical fault' -
ISAF had earlier confirmed the crash and said it was "reviewing the circumstances to determine more facts".
Local officials in southern Afghanistan told AFP the helicopter came down in volatile Kandahar and was not attacked by militants.
"A helicopter belonging to NATO troops has crashed in Takhta Pul, Kandahar province," said Zia Durrani, the provincial police spokesman.
"It was doing military exercises and crashed as a result of technical fault."
The Taliban said on a recognised Twitter account that it had targeted the helicopter and the "wreckage caught fire as it smashed onto the ground, killing all invaders onboard".
Six US troops were killed in the December attack when a Blackhawk chopper went down in the southern province of Zabul.
US officers initially blamed a mechanical failure, but said the crew may have then come under fire. Officials later said that Taliban militants brought down the aircraft.
Aircraft crashes have been a regular risk for the ISAF mission in Afghanistan, with troops relying heavily on air transport to battle the Taliban insurgency across the south and east of the country.
NATO troop movements have fallen sharply over the last year as soldiers withdraw from the 13-year war.
From a peak of 150,000 in 2012, about 51,000 troops now remain in Afghanistan, 33,500 of them from the United States and around 5,200 from Britain.
All NATO combat forces are due to pull out by the end of December.
The helicopter deaths bring the number of British troops killed in operations in Afghanistan to 453 since 2001.
The deadliest incident was in September 2006, when all 14 British personnel on board a Nimrod surveillance aircraft were killed in a crash caused by a leaking fuel pipe.
Since 2001, a total of 3,436 members of the US-led military mission have died in Afghanistan, according to the independent icasualties website.