The collision occurred on the Scarva Road in Banbridge at around 11:30 am on Saturday, November 11.
The smash involved a black Seat Leon and a black Nissan Note.
The victim, aged in her 70s and from Co. Wicklow, was a rear seat passenger in the Nissan.
She was taken to hospital following the collision, but passed away earlier today as a result of her injuries.
A woman aged in her 80s, who was also injured, remains in hospital in a serious condition.
Officers have appealed to anyone who may have seen either vehicle being driven in the area on Saturday morning, or who witnessed the collision to contact them at Armagh on 101 quoting reference number 546 11/11/17.