Police in the South American country said Vilma Trujillo Garcia, 25, was stripped naked, burned and thrown into a gully in the town of Rosita. She suffered 80 per cent burns.
They've arrested church pastor Juan Gregorio Rocha Romero and four other people in connection with the mother-of-two's death.
The victim's husband, Reynaldo Peralta Rodriguez, said she was taken inside a church last week when members thought she was possessed after she allegedly tried to attack people with a machete.
"It's unforgiveable what they did to us. They killed my wife, the mother of my two little ones.
"Now what am I going to tell them?"
Pastor Romero has denied any wrongdoing, telling La Prensa newspaper that Vilma Garcia fell into the fire without anyone pushing her. He also said a demon exited her body.
Assemblies of God, the denomination of church to which Pastor Romero allegedly belongs, has issued a statement denying he is one of its leaders.
Vice president of Nicaragua Rosario Murillo called Vilma Garcia's death "deplorable and to be condemned".
