Witnesses say the mother and daughter were trying to cross Amsterdam Avenue, standing about a foot away from the sidewalk on the busy street when the driver backed into them.
They say the women had the right of way.
Police say the 38-year-old driver was reversing into a parking spot near West 98th Street.
The dent on the rear hatch of his burgundy Ford Explorer showed the impact of the deadly accident.
"I've never seen blood like that before. It was horrible," eyewitness David Gomez said.
"She looked like she was severely hurt," witness Lynn Bryant said. "When they were wrapping the bandage around her she was saying, 'it hurts.'"
It happened just after 5 p.m. Thursday.
The driver stayed at the scene, but when police ran his license they found it was suspended.
He was immediately placed under arrest.
"The other lady took it worse. She was bleeding profusely. He could have waited for that parking spot. I don't even think he looked," Gomez said.
Authorities say 78-year-old Yolanda Casal was pronounced dead at Saint Luke's Hospital.
Casal's 41-year-old daughter is in stable condition.
The driver is expected to be charged with driving with a suspended license.