The shooting happened just before 11 p.m. near Christopher Avenue and Hegeman Avenue in Brownsville.
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The gunfire broke out toward the end of an annual community celebration, the Old Timers Event, and sent people running for their lives.
A 38-year-old man was shot in the head and pronounced dead at Brookdale Hospital. He has been identified as Jason Pagan, according to a police source.
NYPD Commissioner James O'Neill said six of the 11 people wounded have been released from the hospital.
O'Neill says there were more than 100 officers and anywhere from 2,000 to 3,000 people at the gathering, which he called a "great event" that had been held for years.
Police recovered a gun at the playground but it is not clear whether it was the weapon that was used in the shooting.
So far police do not have a suspect and there have been no arrests.
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It is not yet clear what led to the gunfire, police say.
New York Mayor Bill de Blasio tweeted early Sunday that the incident "shattered a peaceful neighborhood event."
New York State Sen. Roxanne J. Persaud expressed frustration with the shooting, which she called "unacceptable" and "cowardly."
"Our community mourns again. We should be able to have fun in open spaces without fear of violence," tweeted Persaud, whose district includes Brownsville. "Respect your community. We are better than the violence."
(The Associated Press contributed to this report.)