Police were still investigating the cause of the crash but said early indications were that one of the vehicles crossed the centre line and collided head on with the other car just after noon yesterday.
The Te Puke man who witnessed the crash described the scene as "horrific" and said he felt helpless as he waited for emergency services to show up.
He said he ran out of his property after hearing a loud bang around noon.
"I just knew it would not be good news but I was still shocked by the state of the cars," he told the Bay of Plenty Times.
" ... There was a person in each car and they were both trapped. There was nothing I could do but try to calm them.
"The emergency guys showed up very quickly but to me it felt like an eternity. I was just running between the cars telling them to hold on, hold on."
The crash happened on the same corner where a driver smashed into then Te Puke police Senior Sergeant Deirdre Lack in December 2010.
Nearby resident Sarah Crawford, who dialled 111 after hearing yesterday's crash, described the corner as "notorious".
"I have lived near that corner for 18 years or so and there must have been 16 fatalities in that time," she said.
"I have lost count of the amount of times I have ran out and dialled 111 in my driveway.
"We have had two fatals in one day there. Whole families wiped out, five people killed in one day. It is a horrific stretch of road even though it looks safe."
Ms Crawford said aside from the fatalities she saw "an accident every month".
Another nearby resident said it was clear someone had died at the scene when emergency crews started "concentrating on one vehicle and not the other".
"You just knew, it was clear someone was dead. It is so sad, a real tragedy, especially someone so young with so much life in front of her. This is a real horror stretch of road."
Senior Sergeant Mike Owen said the incident would be referred to the coroner.
The crash blocked both lanes of SH2 for several hours, with vehicles detoured on to a grass verge nearby.
Ms Crawford said residents were looking forward to the Eastern Link's completion.
The name of the deceased woman had not been released when the Bay of Plenty Times went to print last night.