Anja Niedringhaus, 48, an internationally acclaimed German photographer, was killed instantly, according to an AP Television freelancer who witnessed the shooting.
Kathy Gannon, the reporter, was wounded twice and is receiving medical attention. She was described as being in stable condition and talking to medical personnel.
"Anja and Kathy together have spent years in Afghanistan covering the conflict and the people there. Anja was a vibrant, dynamic journalist well-loved for her insightful photographs, her warm heart and joy for life. We are heartbroken at her loss," said AP Executive Editor Kathleen Carroll, speaking in New York.
The two were traveling in a convoy of election workers delivering ballots from the center of Khost city to the outskirts, in Tani district. The convoy was protected by the Afghan National Army and Afghan police. They were in their own car with a freelancer and a driver.
According to the freelancer, they had arrived in the heavily guarded district compound shortly before the incident.
As they were sitting in the car waiting for the convoy to move, a unit commander named Naqibullah walked up to the car, yelled "Allahu Akbar" - God is Great - and opened fire on them in the back seat with his AK-47. He then surrendered to the other police and was arrested.
Medical officials in Khost confirmed that Niedringhaus died.
Gannon, 60, is a Canadian journalist based in Islamabad for AP. She has covered war and unrest in Afghanistan and Pakistan for three decades.