The woman, thought to be 39, was discovered unconscious in the early hours of Saturday morning in a roadside irrigation canal near the village of Los Ramos close to Murcia, south east Spain.
She was already dead by the time paramedics arrived.
A vehicle found gutted near the scene was traced to a man who police have already sought to question.
Local reports said he had refused to give a statement to police after being arrested and has now been released pending an ongoing investigation.
Civil Guard officers have taken over the probe but have so far refused to make any official comment.
They are understood to be focusing on the theory the unnamed British woman was hurled over a knee-high fence separating the ditch from the road by the force of an impact with a car – or was thrown over the fence by a hit-and-run driver who stopped and saw she was dying.
A spokesman for the central government delegation in Murcia said in a tweet: “Yesterday morning the body of a woman has been found by the RM-301 road between Los Ramos and Torreaguera.
“The dead woman was a British passport holder.
“A burnt-out vehicle was found less than a mile away.
“A link between the two has not been ruled out.”
A spokesman for a local emergency service coordination centre said: “The emergency services have not been able to do anything to save the life of a woman found unconscious in an irrigation canal near the village of Los Ramos close to Murcia.
“Two ambulances were sent to the scene along with local police and Civil Guard officers. Firefighters were also informed.
“All they could do was confirm the woman, who was approximately 39 years old, was already dead after they reached the scene.”
The alarm was raised around 12.40am yesterday.