Police are now examining the dragster, which was taking part in an event at the Santa Pod racetrack in Northants.
The 64-year-old man from Norwich was taken to Bedford Hospital but later died of his injuries.
Hundreds of people witnessed the tragedy at the track which was staging races involving 300 teams.
The dead man was watching the final round of the FIA European Drag Racing Championships, where cars can reach speeds of up to 300mph.
A spokeswoman for Bedfordshire Police said the object was projected into the crowd when the car opened its rear parachute.
It is not clear whether a piece of the vehicle sheared off when the parachute opened or whether it was a piece of debris from the track that flew into the crowd.
A spokesman for Santa Pod said he was unable to comment while the police investigation was taking place.
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