The car first mounted the pavement and then against a garage pillar, police said.
Both the 76-year-old passenger, as well as a pedestrian and her dog, died at the scene of the incident, which occurred at 5:10 pm on Sunday, reported the Thüringer Allgemeine.
The 79-year-old driver was left seriously injured and taken to hospital.
The driver's car was a Volkswagen Tiguan, a type of SUV, or sports utility vehicle. Police are still investigating how the accident occurred, and whether the type of vehicle or the age of the driver played a role.
A police officer and an expert survey an accident site in Reisdorf near Bad Sulza. Photo: DPA
There has been intense focus in SUV vehicles in Germany recently which has only been heightened by recent deadly crashes including one in Berlin in September.
In that incident the driver hit a traffic light, ran over four people on the pavement and broke through a construction fence. A three-year-old boy was among the four dead.
READ ALSO: Berlin horror crash prompts growing calls to ban SUVs from German cities
It is thought by police that the driver suffered an epileptic seizure at the wheel.
The incident spurred a Germany-wide debate about SUVs, with many expressing their safety concerns about the vehicles characterized by their broad size and several off-road features.
"Such tank-like cars don't belong in the city,” said Stephan von Dassel, district mayor of Berlin-Mitte, following the incident, adding that even a small driving mistake in one poses a danger to people's lives.
Protests also erupted at the biennial IAA car show in Frankfurt over safety and environmental concerns of the vehicles, which now account for 20 percent of Germany's market share of cars.
READ ALSO: Frankfurt car show faces protests over SUVs and climate woes