The 29-year-old housewife from Tangerang, west of the Indonesian capital Jakarta, died in hospital on Saturday, the ministry's director general for contagious disease control, I Nyoman Kandun, said.
Another woman near Tangerang has also been confirmed with bird flu, he added.
"We are now at 126 cases of infection, 103 of them fatal," Kandun said.
The latest death from the virus is the eighth in the Southeast Asian country this year. Indonesia has the world's highest death rate from bird flu, with the first case recorded in 2003.
Although no cases of human-to-human transmission of avian influenza have been reported, scientists fear the virus could mutate into a strain that could pass easily from person to person, causing a global pandemic.
