Police Chief Toney Armstrong said officers went to a home in east Memphis to serve a drug-related search warrant. He said a suspect opened fire, striking officers Martoiya Lang and William Vromah.
Armstrong said officers returned fire, striking a suspect.
Armstrong said Lang died of her injuries and Vromah was in stable condition at the Regional Medical Center.
Armstrong said Vromah was stuck multiple times.
The nature of the officer's fatal wound was not released.
The suspect was also taken to the hospital, where the most serious trauma cases in the area are routed, but his condition was not immediately known.
Armstrong said a second person who was in the home was in custody, but no charges were immediately filed.
Authorities said the shooting was reminder that police officers put their lives in danger every day they are on duty.
"Through it all, we appreciate deeply, beyond measure - words can't express the sacrifice they make for our city," Memphis Mayor A C Wharton said.
Wharton said flags will be flown at half-staff within the city to honor Lang.
Lang, 32 and a mother of four, had been with the department since June 2003, Armstrong said.
"She was a friend, a family member," he said.
Several officers gathered outside the hospital. One woman was seen crying loudly and being led into the hospital. Armstrong was visibly shaken as he spoke with reporters outside the hospital.
Lang and Vromah were the 10th and 11th police officers to be shot while on duty since Armstrong took over the department in April 2011.
Wharton said the shooting reflects a problem in Memphis, where too many criminals have too many guns.
"Nobody has a Second Amendment right to load up and kill a police officer," he said.