The accident happened when a car competing in the 14th annual Maures regional rally veered off the road at Plan-de-la-Tour in the Var department on the Mediterranean coast.
The public prosecutor in Draguignan, Danielle Drouy-Ayral, said an official from her office was en route to oversee an investigation. Drouy-Ayral said a race marshal was among the victims.
According to initial reports, it appears the driver, whose identity has not been released, made a mistake at an intersection where he was supposed to turn right, but instead drove straight ahead, crashing into the spectators.
The crash occurred around 4:30 pm (1430 GMT). A large team of firefighters and rescue workers was dispatched to the scene.