Witnesses said emergency services staff performed CPR on the woman for at least 15 minutes before she was pronounced dead at the scene.
Fire volunteers used cutting equipment to free the other three occupants from the severely damaged vehicles.
Invercargill man Mike Grant said he was driving from Cromwell to Queenstown when the car he was following was struck head-on by a car driving ''completely across the road''.
As the tails of both cars flew into the air, he avoided hitting one - ''it was just luck'' - by swerving up a grassy bank on the wrong side of the road.
''I'm counting my lucky stars because I could've been in the car in front.''
He and the car he was following were travelling about 100kmh around a gentle right-hand bend at the time of the collision, Mr Grant said.
He was thankful he had new tyres fitted to his car on Friday.
Trucking contractor Brett McLew, of Cromwell, said he arrived at the scene a few minutes after the accident, and ran over with a fire extinguisher, crowbar and first-aid kit.
A woman lying on the road was already being assisted, so he tried to free a man from one of the cars by cutting the seatbelt, but could not open the door.
He then attempted to help a man and woman out of the other vehicle by trying to kick out the driver's-side door.
The crash closed the highway for two and a-half hours, causing delays for hundreds of motorists travelling between Cromwell and the Wakatipu Basin.
Traffic between Cromwell and Queenstown was diverted via the Crown Range Rd, through Wanaka, before one lane of the highway reopened about 5pm. The highway was fully open about 6.20pm.
Earlier, a man died after his car apparently rolled down a bank and into a river near Milford Sound, police say.
Police said the crash happened at 12.10pm and the driver died at the scene. A second occupant was taken to the local medical centre to be checked.
Police, ambulance and a rescue helicopter attended the crash on the Milford side of the Homer Tunnel.
In another accident, a woman survived after crashing off State Highway 6 and into Lake Wakatipu yesterday evening.
A police spokeswoman said emergency services were alerted just after 6pm that the woman had crashed off SH6 in the Devils Staircase area.
A St John spokesman said the woman suffered moderate injuries and was taken to Lakes District Hospital in Queenstown.
A Fire Service spokeswoman said the car had gone down a 20m bank and had been half-submerged in the lake.
Frankton volunteer firefighters had helped move the woman from the scene using a Stokes rescue basket, she said.
