Investigators were called to the two-car collision on Mollison Street around 2:35pm.
The driver of the second car, a 74-year-old Kyneton woman, was taken to hospital but has died.
The driver of the other vehicle, the 30-year-old Hawthorn East man was, was interviewed and charged with culpable driving.
He has been bailed to appear at Kyneton Magistrates’ Court on 10 September.
Anyone who witnessed the collision has dashcam footage or any other information that could assist police with their enquiries is urged to contact Crime Stoppers on 1800 333 000 or submit a confidential report online at .