Though the company founded by British billionaire Richard Branson said little publicly other than acknowledging the loss of the craft, Branson tweeted that he was flying to the area "immediately to be with the team."
Ken Brown, a photographer who witnessed the crash, told The Associated Press that SpaceShipTwo exploded after a plane designed to take it to high altitude released it and the craft ignited its rocket motor.
Brown said the wreckage fell in the desert north of Mojave Air and Space Port, where the test flight originated. The area is about 120 miles north of downtown Los Angeles.
PHOTOS: Virgin Galactic SpaceShipTwo accident
There is one fatality and one major injury, California Highway Patrol Officer Jesse Borne said. One person parachuted out, he said.
SpaceShipTwo, which is typically flown by two pilots, was designed to provide a suborbital thrill ride into space before it returns to Earth as a glider.
Friday's flight marked the 55th for the spaceship, which was intended to be the first of a line of craft that would open space to paying civilians. At 60 feet long, SpaceShipTwo features two large windows for each of up to six passengers, one on the side and one overhead.
Virgin Galactic - owned by Branson's Virgin Group and Aabar Investments PJS of Abu Dhabi - sells seats on each prospective journey for $250,000, with full payment due at the time of booking. The company says that "future astronauts," as it calls customers, have visited Branson's Caribbean home, Necker Island, and gone through G-force training.
#SpaceShipTwo has experienced an in-flight anomaly. Additional info and statement forthcoming.— Virgin Galactic (@virgingalactic) October 31, 2014
The Federal Aviation Administration said in a statement that the incident happened "shortly after the space flight vehicle separated from WhiteKnightTwo, the vehicle that carried it aloft."
Stephen Hawking, Justin Bieber, Ashton Kutcher and Russell Brand are among the celebrities to sign up for flights. Virgin Galactic reports taking deposits totaling more than $80 million from about 700 people.
A related venture, The Spaceship Co., is responsible for building Virgin Galactic's space vehicles.
During testing for the development of a rocket motor for SpaceShipTwo in July 2007, an explosion at the Mojave spaceport killed three workers and critically injured three others. A California Division of Occupational Safety and Health report said the blast occurred three seconds after the start of a cold-flow test of nitrous oxide - commonly known as laughing gas - which is used in the propulsion system of SpaceShipTwo. The engine was not firing during that test.
Friday's accident was the second space-related explosion this week.
On Tuesday, an unmanned commercial supply rocket bound for the International Space Station exploded moments after liftoff from a launch site in Virginia. No injuries were reported that accident, which drew criticism over NASA's growing reliance on private U.S. companies in this post-shuttle era
Virgin Galactic planned to launch space tourism flights from the quarter-billion-dollar Spaceport America in southern New Mexico once it finishes developing its rocket ship.
Christine Anderson, executive director of the New Mexico Spaceport Authority, did not want to comment on the events unfolding Friday in the California desert or what effect they might have on Spaceport America and the future of commercial space travel.
Virgin Galactic is in line to be the main tenant at the spaceport that was built specifically to launch paying customers into space, a dream of Branson's. His company has repeated pushed back the timetable for when the $250,000 flights were to begin, pointing to delays in development and testing of the rocket ship.
Taxpayers footed the bill to build the state-of-the-art hangar and runway in a remote stretch of desert in southern New Mexico as part of a plan devised by Branson and former New Mexico Gov. Bill Richardson. Critics have long challenged the state's investment, questioning whether flights would ever get off the ground.
SpaceShipTwo is based on aerospace design maverick Burt Rutan's award-winning SpaceShipOne prototype, which became the first privately financed manned rocket to reach space in 2004.
While several people expressed sadness that one pilot was killed and another was seriously injured, many also said they understand the risks that come with pushing the boundaries that have hampered the burgeoning commercial space travel industry.
Here is some of the reaction to the crash:
- Former NASA top space scientist Alan Stern has seats to fly on Virgin Galactic - and its competitor XCOR aerospace. He isn't rethinking plans to fly in space at all.
"Let's not be Chicken Littles here," said Stern, now a vice president at Southwest Research Institute. "The birth of aviation was also a very dangerous time period."
"All forms of transportation carry risk," he said. "To expect spaceflight could somehow be different is unrealistic on the part of the public or anyone. Secondly to do something very hard, to do something on the frontier, comes with risk."
- Eric Stallmer, the president of the Commercial Spaceflight Federation, offered his sympathies to the families affected by the explosion.
"Today, we are tragically reminded of the tremendous challenges that we face every day in our efforts to push the envelope of human experience and capability in space enterprise and exploration," he said.
Stallmer and Bill Nye, chief executive of the Planetary Society, said the courage of both pilots and the commitment Virgin Galactic has made to space tourism will serve as inspiration as the industry continues to make space travel as safe and reliable as possible.
- Former NASA astronaut Jerry Linenger, who nearly died in a 1997 fire aboard the Russian space station Mir, said when he first met British billionaire Richard Branson, founder of Virgin Galactic, he told him the first thing he'd have to worry about is liability insurance.
"You will have setbacks," Linenger said he told Branson. "That is a reality."
- In New Mexico, from where Virgin Galactic planned to launch its flights within the next year, hearts were sinking. The New Mexico Spaceport Authority issued a statement saying its thoughts and prayers were with the crew's family members and the team that has been working for years to develop the rocket.
"We will continue to work with and lend our support to Virgin Galactic through this tragedy and in the coming months as we move forward," the authority said.
-The National Space Society said it stands by Virgin Galactic CEO George Whitesides and encouraged the company to press on.
"We expect that the cause of the accident will be found and fixed so that the Virgin Galactic dream of 'opening space to tens of thousands of people' can become a reality," said Mark Hopkins, chairman of the NSS Executive Committee.
-NASA Administrator Charles Bolden also shared his condolences.
"While not a NASA mission, the pain of this tragedy will be felt by all the men and women who have devoted their lives to exploration," he said. "Space flight is incredibly difficult, and we commend the passion of all in the space community who take on risk to push the boundaries of human achievement."
ABC News contributed to this report.
Commercial development has been slower than expected. When Virgin Group licensed the technology from Microsoft co-founder Paul Allen, who funded about $26 million for SpaceShipOne, Branson envisioned operating flights by 2007.