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.
The balloon was stuck in the lines, then Mr Vonderahe saw the balloon portion - called the envelope - float away, a burning tank still attached. "Debris was flying everywhere," he said.
The tank fell harmlessly to the ground and the envelope was eventually found about 25km away.
The National Transportation Safety Board will investigate the crash.
The yellow, brown and orange triangle-shaped balloon was among hundreds competing in events at the weekend balloon festival.
Mr Lachendro was a father of two sons and a daughter and enjoyed ballooning with friends, said his daughter, Amanda.
"I just want everyone to know that he loved what he did," she said.
The annual festival is Albuquerque's major tourist drawcard, but it has had fatalities before, mostly from balloons hitting power lines.
Last year, a 60-year-old was killed. In 1982, four people died. Other fatalities were recorded in 1990, 1993 and 1998
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