A six-year-old boy has been killed and two others have been seriously injured by a rally car which ploughed into a group of spectators at an event in Western Australia's south-west.

The Subaru WRX driven by a 44-year-old man was taking part in the WA Rally Championship event at Donnelly River late on Saturday afternoon when it left the road and hit the group, police say.

The car was travelling south on Penny Road when it lost control on approach to a right-hand bend and slid through temporary barriers and into the crowd.

The two injured children were flown with their mother to Perth's Princess Margaret Hospital overnight.

An eight-year-old girl is in a serious condition and a 10-year-old boy is serious but stable.

Police said neither the driver nor his navigator were injured.

Police remain at the scene and officers from the Major Crash squad are investigating.

The crash happened between the towns of Manjimup and Nannup, about 280 kilometres south of Perth.

Police will review vision from the dashboard camera today.

The Confederation of Australian Motor Sport (CAMS) has released a statement saying it was "saddened" by the incident and extended its sincere condolences to family and friends of those involved.

CAMS Chief Executive Officer Eugene Arocca said the thoughts of CAMS and the Australian motor sport community were with them at this difficult time.

"This is a sad and tragic incident and we extend our deepest sympathies to all involved," he said.

The statement said CAMS would assist WA Police with their investigations.