A 19-year-old man, believed to be from St Helens, was killed in the accident which also left two women and a man with serious injuries.
Police say a silver Ford Mondeo collided head on with a black cab on Manchester Road around a quarter of a mile down from the junction with Rossendale Road at 1 am.
The Mondeo was travelling down the hill from the Rossendale Road junction and the taxi was going up the hill.
The Mondeo driver, a 19-year-old man believed to be from St Helens, was pronounced dead at the scene.
His next of kin is still to be informed.
The 48-year-old taxi driver, sustained serious injuries to his chest and legs and was taken to the Royal Preston Hospital.
It is believed he was cut out of the vehicle by firefighters from Burnley Station.
The taxi’s two passengers, two women aged 58 and 38, received head injuries. They were taken to the Royal Blackburn Hospital.
Their injuries are described as serious, but are not thought to be critical.
A police spokesman said it is too early to say how and why the collision happened. He added that an investigation into how the collision occurred is underway and anyone with any information about what happened should contact the police on 101 quoting log number 81 of November 7th.
The road was closed until 6.30am while accident investigation work was carried out.