Witnesses said the planes were flying in formation during the show at the Marine Corps Air Station at about 4 p.m. and one dropped below the trees and crashed, sending up clouds of smoke.
Raymond Voegeli, a plumber, was backing out of a driveway when the plane ripped through a grove of pine trees, dousing his truck in flames and debris. He said wreckage hit "plenty of houses and mobile homes."
"It was just a big fireball coming at me," said Voegeli, 37. "It was just taking pine trees and just clipping them."
Witnesses said metal and plastic wreckage - some of it on fire - hit homes in the neighborhood, located about 35 miles northwest of Hilton Head Island. William Winn, the county emergency management director, said several homes were damaged. Eight people on the ground were injured.
The crash took place in the final minutes of the air show, said Lt. Cmdr. Anthony Walley, a Blue Angel pilot. He said the name of the pilot would not be released until relatives were notified of the death.
"Our squadron and the entire U.S. Navy are grieving the loss of a great American, a great Naval officer and a great friend," Walley said.
A Navy statement said the pilot had been on the team for two years - and it was his first as a demonstration pilot. The accident was under investigation.
John Sauls, who lives near the crash site, said the planes were banking back and forth before one disappeared, and a plume of smoke shot up.
"It's one of those surreal moments when you go, â€˜No, I didn't just see what I saw,'" Sauls said.
The Blue Angels fly F/A-18 Hornets at high speeds in close formations, and their pilots are considered the Navy's elite. They don't wear the traditional G-suits that most jet pilots use to avoid blacking out during maneuvers. The suits inflate around the lower body to keep blood in the brain, but which could cause a pilot to bump the control stick - a potentially deadly move when flying inches from other planes.
Instead, Blue Angels manage G-forces by tensing their abdominal muscles.
Saturday's show was at the beginning of the team's flight season, and more than 100,000 people were expected to attend. The elite team, which is based at Pensacola Naval Air Station, recently celebrated its 60th anniversary.
The last Blue Angel crash that killed a pilot took place in 1999, when a pilot and crewmate were killed while practicing for air shows with the five other Blue Angels jets at a base in Georgia.