The incident happened at about 5.25pm on Monday, May 9.
A member of the public saw a woman on the fourth-storey ledge of a property in Albemarle Crescent.
A short time later, the woman, who was aged in her 40s, was seen to fall from the ledge.
She died from her injuries.
A man has been arrested as part of the investigation.
He remains in police custody for questioning.
North Yorkshire Police said investigation is in the early stages and police are working to establish the exact circumstances that led to her death.
At the time of the incident, the road was closed to allow emergency service to attend the incident.
It reopened at around 9.15pm.
The road was then also temporarily closed again on Tuesday May 10 nto allow investigation work to continue.
Police are asking anyone who witnessed the incident and who has not yet come forward to contact them.
This is the second incident involving a fall from a building in Scarborough on Monday, May 9.
In a separate incident, a woman fell from a building on Foreshore Road.
She was taken to hospital with serious injuries and remains in a stable condition.