It happened Saturday morning during an airport open house in Cottonwood, about 100 miles north of Phoenix.
Cottonwood police Sgt. Gareth Braxton says the balloon and paraglider became entangled at an altitude of about 500 feet.
The balloon ripped open and both fell quickly. Their landing was believed to have been softened somewhat by a chain-link fence in a vacant parking lot.
Three people aboard the balloon suffered minor injuries. The paraglider pilot suffered head and spinal injuries, but the injuries aren't believed to be life-threatening.