222 skydivers from 22 nations were taking part in the free-fall jump that began at 18,000 feet.
The team planned to form two large shapes before separating, and pulling their chutes.
The Arizona Republic reports 46-year-old Diana Paris from Berlin, Germany died after her chute failed to open on time.
Skydive Arizona released a statement saying the parachute never opened all the way, and Paris was too close to the ground to deploy a back-up chute, causing her to hit the ground at a high rate of speed.
She was declared dead on the scene.
A spokesman said the incident "had nothing to do with the size of the group," and confirms that the world record attempt will continue with 221 participants.
"Our dear friend cannot and will not be replaced," a statement said.
Another diver told the AP “it's sad, but also it happens.
You know, it just happens."