Images posted on social media showed a car and van ablaze and hooded individuals throwing petrol bombs and fireworks at police vehicles.
It was not immediately clear who the woman was or who shot her.
“Sadly I can confirm that following shots being fired tonight in Creggan, a 29-year-old woman has been killed,” Assistant Chief Constable Mark Hamilton said in a statement on Twitter.
“We are treating this as a terrorist incident and we have launched a murder enquiry.”
The violence came in the run-up to the Easter weekend, when Republicans opposed to British presence in Northern Ireland mark the anniversary of a 1916 uprising against British rule.
A car-bombing and the hijacking of two vans in Londonderry earlier this year were blamed on a dissident paramilitary group
A car-bombing and the hijacking of two vans in Londonderry (also known as Derry) earlier this year were blamed on a dissident paramilitary group.
Arlene Foster, leader of the Democratic Union Party, which is in favor of Britain’s presence in Northern Ireland, described the death as “heartbreaking news.”
“A senseless act. A family has been torn apart. Those who brought guns onto our streets in the 70s, 80s & 90s were wrong. It is equally wrong in 2019. No one wants to go back,” she wrote on Twitter.
A 1998 peace deal largely brought an end to three decades of sectarian bloodshed in Northern Ireland between republican and unionist paramilitaries, as well as British armed forces, in a period known as “the Troubles.”
Some 3,500 people were killed in the conflict — many at the hands of the Irish Republican Army (IRA).
Police have blamed a group called the New IRA for the flare-up in violence in recent months.
Some have expressed fears that recent attacks could be a sign that paramilitaries are seeking to exploit the current political turbulence over Northern Ireland and its border with the Republic of Ireland caused by Brexit.
Michelle O’Neill, the deputy leader of Irish republican party Sinn Fein, condemned those responsible for the killing.
“My heart goes out to the family of the young woman shot dead by so-called dissidents,” she wrote on Twitter.
“This was an attack on the community, an attack on the peace process and an attack on the Good Friday Agreement,” she added, while calling for calm.
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