The M-346 jet, reportedly undergoing post-production testing, took off from Leonardo’s site near Varese at 11:00 am (1000 GMT), before losing contact 35 minutes later.
The jet crashed into the side of Monte Legnone, in the province of Lecco. Witnesses in the area reported seeing a “fireball” crash into the mountainside, Italian media reports.
The aircraft wreckage was found near the town of Colico at the lake’s northeastern side, Leonardo said in a statement.
“Unfortunately, the instructor pilot, who belonged to an external company, died in the accident,” it said, offering Leonardo’s “most heartfelt condolences”.
A spokesman confirmed to AFP the victim was British, adding that the other pilot, who survived the crash, was Italian.
“Leonardo clarifies that, taking into account the current status of the relevant investigation, any theory on the possible causes is premature,” the firm said.
It added: “The flight plan included trials aimed at demonstrating specific capabilities which had already been tested during several flights already carried out in the past.”
The two pilots ejected before the plane crashed at an altitude of about 2,500 metres (8,200 feet), the Corriere della Sera newspaper reported.
Video apparently taken at the scene showed clouds of black smoke billowing over the mountainside.
The surviving pilot was taken to hospital with facial trauma, the paper said.