Brock was competing in the Targa West Rally at Gidgegannup about 30km from Perth.
The Targa West Rally has racers racing against time over closed public roads and on special stages at race circuits.
Brock's car was understood to be so far off the road at the time of crashing that witnesses say six competitors cars had driven past the crashed vehicle without noticing it.
Brock's co-driver Mick Hone is said to be in critical condition after their Daytona Coupe hit a tree.
Brock is experienced at driving the full roll-caged Daytona Coupe, described as an "odd looking" car that is all front and no back.
Witnesses at the scene said a crash investigation unit was called before an ambulance had been despatched.
Brock was 61 years old. No other cars are believed to have been involved.
The Confederation of Australian Motor Sport (CAMS) said in a statement the accident occurred at about 1.50pm (AEST).
Sixty-one-year-old Brock's co-driver, believed to Mick Hone, has been taken to hospital in a stable condition. CAMS said it will conduct a full investigation into the incident.
In the meantime, CAMS and event officials are working with the relevant civil authorities.
"On behalf of the motor sport community, CAMS offers its sincere sympathy to Peter's family and many friends," the statement said.
Targa West is a tarmac special stage rally.
Brock was a dominant figure in Australian motor sport, winning the Bathurst 1000, Australia's most prominent domestic motorsport event, a total of nine times through the 1970s and 80s.
He won six Bathurst 1000 wins in seven years, including his victory in the 1979 event, which he won by a record six laps.
He retired from full-time driving in 1997.
Since 1997, he had made two return visits to Bathurst in 2002 and 2004 and returned to top-level touring car racing as a team owner of "Team Brock'' in 2002 in the V8 Supercar category.
A year later he sold his share in the team to Kees Weel.
In recent years, he occasionally competed in various motorsport events such as the Targa Tasmania.