The 52-year old was rescued alive by police but died in hospital from breathing problems caused by severe throat swelling after her windpipe was bitten by the insects.
The victim had gone to help her son who had been bound to the tree by angry vigilantes who accused them of trying to steal a car in Caranavi, Bolivia, around 100 miles north east of the capital La Paz.
Her daughter also received the same punishment but she and her older brother survived and are now recovering from her injuries.
Local reports said the trio were also beaten and burnt using an accelerant.
The shocking incident happened on New Years Eve.
A local radio station published a picture of two of the three people blindfolded and bound to the tree while villagers including a woman with a child in her arms and a schoolboy kneeling on the ground looked on from a few feet away.
Local authorities said preliminary investigations had showed the dead woman and her children, aged 22 and 28, had travelled to the area from La Paz to recover a debt.
The tree they were tied to was a Palo Santo, a mystical tree growing on the coast of South America which is the favourite haunt of colonies of the Brazilian fire ant known for their extremely painful bites.
Local police chief Gunter Agudo said: “We managed to rescue all three people but one of them, the 52-year-old woman, was in a bad way and had to be taken to hospital. She died at 3.30pm on New Years Eve.”
Revealing her injured son and daughter had claimed they had travelled to Caranavi to recover a debt, he added: “Initially the investigation was opened as a probe into an attempted car theft but now it has been changed to a murder and serious assault investigation.”
Only one person has been arrested so far on suspicion of inciting locals to commit their shocking act, although the authorities have confirmed others took part.
The unnamed suspect was held on January 1 and has been remanded in prison following a court appearance.
Roxana Bustillos, lawyer for the family targeted by the vigilantes, said: “It’s probable that the ants bit the victim’s windpipe, which caused an inflammation and meant she wasn’t able to breathe.”
One local described the trio, despite the authorities’ insistence they suspected no wrongdoing on their part, as criminals who had gone to the area to “make mischief” and said they had picked on poor people who had made huge sacrifices to obtain their own vehicle.
But Roberhtmar Aramayo, who described himself as a nephew of the dead woman, said on the Facebook page of a local radio station: “Damned community Indians of Caranavi.
“My family is suffering the loss of my beloved aunt. I hope the courts clarify what’s happened because they’ve left my cousins orphans.”