The balloon hit power lines and burst into flames at a ballooning festival near Albuquerque, New Mexico, throwing the two men to the ground.
Witnesses at the International Balloon Fiesta said winds had picked up and many of the balloons were flying low just before the Wings of Wind crashed in Bernalillo, just north of Albuquerque, in the southwestern American state.
Stephen Lachendro was killed and Keith Sproul was critically injured.
Kathie Leyendecker, a spokeswoman for the annual festival, said she did not know who was piloting the balloon.
Mr Lachendro was found dead on the side of a ditch, while Mr Sproul was unconscious and taken to hospital, Rio Rancho Fire Battalion Chief Paul Bearce said.
Witness Glenn Vonderahe said he "couldn't believe it".
"I saw the balloon and the next thing I knew there was a lot of fire and smoke. There was fire under the balloon," he said.
He said the balloon landed, then bounced back up and apparently hit some power lines.
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