The parachutist, who has not yet been publicly identified, was a member of an elite Navy parachute team called the Leap Frogs.
The team was performing at New York Harbor’s Fleet Week festival, doing a jump into Liberty State Park when his “parachute failed to open and he landed in the water”, according to Rear Admiral Jack Scorby, commander of the Navy region Mid-Atlantic.
The US Coast Guard had been on standby throughout the event and was able to reach the sky diver quickly but he was pronounced dead at Jersey City Medical Center at 1.10pm Sunday local time, about an hour after the display.
Bjoern Kils, 37, of Jersey City, told Reuters he had been watching the event from a nearby boat and saw three Leap Frogs jump from a helicopter, complete their display and land.
He said: “Almost the same time that they touched down in Liberty State Park we heard a splash and turned around very quick.
“I saw the water splash, and apparently there was a fourth parachutist.”
He watched rescuers pull the man from the water and try to resuscitate him, saying afterwards: “He was just limp in the water”.
CBS reported that the yellow parachute had somehow separated from the Seal and landed in a car park a few blocks away.
Rich Collins, 59, had been watching from a nearby marina and said he saw several people make the jump but noticed one of them “seemed not to have his cute”.
Rear Adm. Scorby said the parachute had “malfunctioned” and the incident is being investigated.
He added: “Our hearts and prayers go out to his family, and I ask for all of your prayers for the Navy SEAL community who lost a true patriot today.”
The annual Fleet Week brings dozens of US warships and thousands of military personnel to the city, giving members of the public the chance to meet Sailors, Marines and Coast Guardsmen.