The C-130 from an Air National Guard wing based in Charlotte, North Carolina, was carrying a National Guard crew of six and fighting a 6.5-square-mile blaze in the Black Hills when it crashed on Sunday.
Seven other US Air Force aircraft have now been grounded, slashing the number of large air tankers fighting this summer’s outbreak of wildfires by a third.
The military grounded the seven C-130s indefinitely. That has left just 14 federally-contracted heavy tankers in use.
President Obama signed a bill last month hastening the addition of seven large tanker planes to the nation’s run-down aerial firefighting fleet, at a cost of $24m (£15.4m), but the first will not be available until mid-August.
A military spokesman said the grounded planes were being used in Colorado, Wyoming, Montana, where emergency crews have been battling 10 fires, and South Dakota.
Fires are also raging in states including Utah, Idaho, Nevada and New Mexico.
The US Forest Service will have to prioritise fires said a spokeswoman.