The two planes collided in mid-air at around 4:30pm over the Adriatic Sea while performing a manoeuvre known as the “mirror flight”, Ansa reported.
One of the pilots, 47-year-old Marco Ricci, died in the crash and his body was recovered three hours after the collision, four metres below the surface of the water.
The other pilot, Luigi Wilmo Franceschetti, 43, was able to land a few metres from the shore before being rescued by bathers. He was taken to hospital in Teramo but was reportedly unhurt.
The incident happened just before the scheduled Frecce Tricolori exhibition, which was immediately cancelled after the accident.
The dead pilot's 16-year-old son, who was also a flying enthusiast, was reportedly watching the show from the shore.
An autopsy is set to be carried out on Wednesday and an investigation has been opened into the crash.
The tragedy was caught on camera by spectators on a nearby beach. The footage shows one of the planes falling directly on top of the other before plunging into the sea.