The teen was killed when his harness came undone while he was riding an attraction known as "Hell" — a ride which includes 360 degree turns, and travels at speeds of up to 60kph (37mph).
"We received a call at 4:45 pm because an 18-year-old man, who was Icelandic, apparently because of a fault in the seat's harness, was thrown out," said a source at Alicante provincial police station.
"He hit the ground and died shortly afterwards in the ambulance," the source told news agency AFP.
It is not yet known whether the teen's harness had not been properly secured, or whether a mechanical fault was to blame, local daily Levante reported.
Police are now investigating the incident.
This is the first fatal accident at Terra Mitica since its opening in 2000. The "Hell" rollercoaster was opened in 2007.
Park authorities said on Monday the ride was properly certified and daily inspections were carried out on the ride. Terra Mitica did not know the causes of the accident, management added.
The park also said it had contacted the German manufacturer of the ride asking for its engineers to investigate the causes of Monday's tragedy.