The Mirage 2000 aircraft was on a routine training sortie when it developed a snag in the engine and crashed near Bhind district, an IAF spokesperson said in Delhi.
He said the two pilots in the aircraft had managed to eject and search and rescue operations have been launched to locate them.
The IAF has ordered a court of inquiry (CoI) to ascertain the reasons behind the crash.
The Air Force operates a fleet of 51 Mirage aircraft from the Maharajpura air base in Gwalior.
These aircraft started getting inducted into the IAF in the mid-80s and have had a very good flight safety record, the spokesperson said.
The IAF has also recently signed two deals worth over USD 3.2 billion for upgrading the capabilities of the Mirage 2000 with French companies Dassault, Thales and MBDA.
This is the second crash involving an IAF aircraft this year. A Kiran MK II trainer plane had crashed in Chennai on January 30.
In this financial year, this is the eighth crash of a fighter aircraft of which most were from the MiG 21 series.
The two pilots were Air Marshal Anil Chopra, Air Officer (Personnel) at the Air Headquarters in Delhi, and Wing Commander Ram Kumar and they both were safe, IAF sources later said.
"They have ejected and they are safe," they said.