Thirteen miners became trapped underground at the Sago mine in Tallmansville after an explosion on Monday.
After one miner was found dead, reports emerged that 12 men had been found alive.
But hours later mine officials said twelve miners were in fact dead.
A 13th miner was the lone survivor and was taken to a hospital, where he was in critical condition.
A US coal company executive says it became clear within 20 minutes that the news anxious family members had received about the survival of a dozen trapped miners was terribly wrong.
Yet for three hours, church bells rang in celebration, families joined arm-in-arm to sing joyous hymns, the governor proclaimed it a miracle, and television newscasts and newspapers spread the word.
When the truth finally unfolded early on Wednesday, with families members called back and told the 12 were actually dead and only one miner survived, joy turned to fury and a scuffle broke out when relatives lunged at a coal company official.
International Coal Group chief executive Ben Hatfield said families were not told of the mistake until three hours later because officials wanted to have all the information right first.
"Let's put this in perspective. Who do I tell not to celebrate? I didn't know if there were 12 or one (who were alive). Until we had people who could measure the vital signs ... we didn't want to put the families through another roller coaster," Mr Hatfield said.
Neither Hatfield nor Governor Joe Manchin would say who was responsible for the misinformation, but Mr Hatfield told reporters he believed someone overheard communications from rescuers who had been communicating from a special mine phone after they reached the bodies.
Whoever overheard misunderstood the information and someone relayed it to the families, Mr Hatfield said.
Hopes dashed
That word came just before midnight, and to relatives who feared the worst about the 13 miners trapped 79 metres underground following Monday's explosion, it was as if their prayers had been answered.
"A person said: 'There are miracles - 12 alive and one dead'," said John Casto, who was inside the church when the man he couldn't identify ran to the front of the church and made the proclamation.
Several relatives, who danced and praised God as the church bells rang, said an unidentified mine foreman had called someone at the church on a mobile phone to relay the information.
A few minutes later, Mr Casto said another man he didn't know came to church and said squads cars would pick up the miners and bring them to the church where they would be reunited with their families.
The man said "it would be like another Christmas," Mr Casto said, chocking back tears.
Darlene Groves, the sister-in-law of one of the miners, Jerry Groves, said the governor braced her mother-in-law from a fall during the commotion.
As Darlene rushed to her mother-in-law's aide, she touched Mr Manchin's sleeve and quietly asked him, "Are all 12 men alive?"
"He said, yes," Darlene Groves said. She said no one else heard the conversation, and Mr Manchin left for the mine to gather details.
Three hours later, Mr Hatfield and Mr Manchin appeared at the church to announce that there had been a miscommunication and all but one miner was dead.
Mr Casto said it took a while for relatives to absorb the news. And then a pastor had to tell the angry crowd to calm down.
Ann Merideth, whose father, Jim Bennett, was trapped in the mine, said she was giving thanks in the church until she learned he had died.
Ms Merideth's husband, Daniel, said family members were visibly angry and lunged at a coal company official. About a dozen state troopers and a SWAT team were positioned near the church because police were concerned about violence.
Mr Manchin spoke to The Associated Press from his mobile phone shortly after relatives said they had received word the miners were safe.
"The rescue people have been talking to us. They told us they have 12 alive," he said.
He said later he went to the mine site to confirm the news when rescuers said there had been miscommunication and not all had survived.
Investigation launched
The White House has announced that a federal investigation, led by the Mine Safety and Health Administration, had been opened to determine the cause of the deadly accident.
US President George W Bush offered condolences to the families of 12 coal miners who died.
"Today, our nation mourns those who lost their lives in the mining accident in West Virginia," the president said.
"We send our prayers and heartfelt condolences to the loved ones whose hearts are broken. We ask that the good Lord comfort them in their time of need," he said.
Mr Bush also thanked rescue workers who laboured around the clock since Monday in a frantic effort to rescue the trapped miners.