Sources said the clergyman had his throat slit by a man wearing an Islamic headscarf after a siege at a church in Saint-Etienne-du-Rouvray, south of Rouen, Normanday.
Two men who stormed the church were shot dead by police.
Vatican spokesman Fr Federico Lombardi said the Pope was being kept up to date with developments and that he felt pain and horror at the "absurd violence".
A statement from the Catholic Church said: "We are particularly shocked that this horrible violence occurred in a church, a sacred place where love of God is proclaimed".
The leader of Anglicans, Archbishop of Canterbury Justin Welby, also condemned the attack.
He tweeted: "Evil attacks the weakest, denies truth & love, is defeated through Jesus Christ. Pray for France, for victims, for their communities."
Speaking from the Catholic Church's World Youth Day in Poland the Archbishop of Rouen, Dominique Lebrun, said he learnt the news with "sadness".
"I cry out to God with all men of good will. I would invite non-believers to join in the cry! With the young people at WYD, we pray as we prayed at the tomb of Father Popiulusko in Warsaw, assassinated during the communist regime.
He said he was travelling back to his diocese "which is very much in shock".