The bomb was detonated near the village of Bidnija in northern Malta after 3pm.
Local police said that the explosion killed Caruana Galizia, 53, a prominent investigative journalist, who ran a very poplar blog.
Police said that she was killed as she was driving near Bidnija.
The Times of Malta newspaper reported that her body was blasted out of the car and into a nearby field.
Ms Galizia’s blog relentlessly highlighted cases of alleged corruption, often involving politicians from the Mediterranean island.
Maltese Prime Minister Joseph Muscat, who faced accusations of wrong-doing by Ms Galizia earlier this year, denounced her killing, calling it a “barbaric attack on press freedom”.
He said: ”I will not rest until I see justice done in this case. Our country deserves justice.”
Mr Muscat called early elections in June as a vote of confidence to counter Ms Galizia’s allegations of corruption.
She said documents in a small Malta-based bank showed that Muscat’s wife was the beneficial owner of a company in Panama, and that large sums of money had been moved between the company and bank accounts in Azerbaijan.
However, both Mr Muscat and his wife denied the accusation and Mr Muscat won reelection.
Malta is the European Union’s smallest state and has a population of 400,000.
According to The Times of Malta, the explosion left debris from the car, a Peugeot 108, strewn across the road and in a nearby field.
Ms Galizia, lived in Bidnija, a short distance from where the car bomb exploded.
Sources told The Times that one of her sons heard the blast from their home and rushed out to see what had happened.
Forensics teams are now on scene to asses the area.
Ms Galizia’s outspoken blog had turned its fire on opposition politicians of late.
She wrote on Monday: “There are crooks everywhere you look now. The situation is desperate.”
In another entry last year, she wrote: “Malta´s public life is afflicted with dangerously unstable men with no principles or scruples.”
Malta Television reported that Ms Galizia had filed a complaint to the police two weeks ago to say she had received threats.
Archbishop Charles Scicluna paid tribute to the journalist and said that the country had lost “one of the best investigative journalists in Malta.”
The Archbishop insisted that, despite the attack, people should not feel intimidated as it would be giving in to the murderer.