The accident occurred early Wednesday over the famed sculpted rock formations of Cappadocia in the Guvercinlik Valley of Nevsehir province, the Dogan news agency reported.
The balloons simultaneously went down after strong winds blew them off course, Nevsehir Governor Mehmet Ceylan said, according to Dogan.
One balloon's basket was dragged 150 meters before it made a rough landing and flipped, Dogan added.
A Chinese tourist, identified as 23-year-old Tang Yi, died on the spot while eleven other tourists, eight of them Chinese and Malaysian nationals and three of them Turkish citizens, were hospitalised for fractures and broken bones.
Two Malaysian tourists are being treated in hospital in a serious condition, Dogan said. Security forces and ambulances were dispatched to the area.
An investigation was underway to determine the cause of the crash.
Ballooning has become increasingly popular in recent years in Turkey although there have been repeated concerns about safety standards.
Several companies offer hot-air balloon rides over Cappadocia, which is a major tourist attraction with its cone-shaped rock formations, rock-carved underground cities and early Christian churches.
Three Brazilian tourists visiting Turkey were killed in May 2013 when two hot air balloons collided above Cappadocia.
