NSW Police said the marked police car had its lights and sirens on as it chased reports of a stolen car, when it crashed in Redfern, Sydney about 1.30am on Friday .
The passenger in the police car, female constable Mia Lay, died instantly upon impact.
The 20-year-old police officer had only been on the force for 16 months and showed exceptional promise, NSW Police Commissioner Mal Lanyon said.
"There is nothing I can easily say that takes the pain away but please know that Mia was a loved police officer," he told officers on Friday.
Mr Lanyon said it was too early to provide any specific details about the speed the police vehicle was travelling until the crash investigation was completed.
Police Minister Yasmin Catley said her thoughts were with the officer's loved ones.
"Today is a dark day, a very sad day. We've lost a beautiful, young, enthusiastic and... wonderful police officer," she told reporters after meeting with her parents.
"Our police officers dedicate themselves to looking after others, and today the NSW Police family is mourning one of its own."
Paramedics treated the driver, a male constable, before he was taken to hospital in a stable condition.
The NSW Police watchdog said it would monitor the force's investigation into the crash to ensure public confidence.
The Law Enforcement Conduct Commission said it could not independently investigate the incident until NSW Police finishes its probe, and any coronial or criminal proceedings are over.
Her partner is also reportedly a serving police officer and has been offered support.
Premier Chris Minns said he was thinking of the officer injured in the crash and those who responded at the scene.
The police union paid tribute to their fallen colleague saying they were shocked by her death, days out from National Police Remembrance Day on 29 September.
"The death of this officer is sad evidence of the dangers they face," the Police Association of NSW president Kevin Morton said.
"In the coming days, as the community learn more about this officer, it will become apparent what a special young person they were. We grieve with our members and commit to supporting their family into the future."
Nearby Regent Street remains closed in both directions between Lawson and Cleveland streets.
Motorists have been advised to avoid the area, with several bus routes being diverted.
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