The incident, which took place at around 7.24am on Sunday on the A96 near Coachford, involved two vehicles - a grey Volvo and a silver Dacia.
Officers confirmed that two people sustained minor injuries as a result of the crash, whilst the 20-year-old female driver of the Dacia sustained serious injuries.
Police confirmed that she subsequently succumbed to her injuries and was pronounced dead at the scene.
The road was closed off with diversions in place following the incident and officers said that it will be closed "for some time".
Sgt Andy Ramsay, from the Roads Policing Dept said: "Our thoughts at this difficult time are with the friends and family of those involved."
Police have confirmed that an investigation into the cause of the collision is under way and have asked that anyone who saw the crash or has dashcam footage to contact them.