A police spokesman in the Khost province said the 48-year-old German photographer was killed and Canadian journalist Kathy Gannon was seriously injured in the shooting.
Gannon was taken to hospital but Niedringhaus died instantly, the spokesman said.
He confirmed that the attack was carried out by an Afghan policeman but it was not clear why the photographer and journalist were targeted.
Niedringhaus was working in Afghanistan for the US news agency Associated Press to cover the elections with voting starting on Saturday.
Her death comes after Swedish journalist Nils Horner was killed in Kabul last month
Niedringhaus was part of a team which won a Pulitzer Prize in 2005 for photography of the Iraq War.
The 48-year-old started her career as a freelance photographer for a local newspaper in her hometown of Höxter, North Rhine-Westphalia, at the age of 16.
After finishing high school, she went on to study German literature, philosophy, and journalism in Göttingen, according to her website.
She went on to work for the European Pressphoto Agency (EPA) as a chief photographer until 2001 where she covered the conflict in the former Yugoslavia.
She was also based for several years in Sarajevo and in Moscow.
In 2002 Niedringhaus joined the AP as a staff photographer based in Geneva, which remained her base.
She covered most of the world’s conflicts including Israel, Palestine, Iraq, Afghanistan and Pakistan and had been injured several times.
On her first day in Sarajevo, Niedringhaus was hit by a sniper’s bullet.
And in 1997, her foot was crushed and broken in three places by a police car while she was covering demonstrations in Belgrade.
In 1998 in Kosovo, Niedringhaus was blown out of a car by a grenade and in Albania in 1999 she was one of a group of journalists mistakenly bombed by Nato forces.