The woman was identified by several reporters as Lyra McKee, a journalist who had earlier posted an image that appeared to be of the riots in the city, also known as Derry, accompanied by the caption, "Derry tonight. Absolute Madness."
Images of the unrest posted on social media showed a car and van ablaze and hooded individuals throwing petrol bombs and fireworks at police vehicles.
"Sadly I can confirm that following shots being fired tonight in Creggan, a 29-year-old woman has been killed," Assistant Chief Constable Mark Hamilton said in a statement on Twitter.
"We are treating this as a terrorist incident and we have launched a murder enquiry."
It was not immediately clear who had fired the shots that killed the woman but a leading republican politician blamed "so-called dissidents".
Leona O'Neill, a Belfast Telegraph reporter, said she had been next to the woman when she was shot. "I called an ambulance for her but police put her in the back of their vehicle and rushed her to hospital, where she died," she tweeted.