Police said Nicholas Morley, 30, and Matthew McConvile, 32, were driving a Porsche 911 in the Gumball 3000 rally — a 4,825-kilometer (3,000-mile) race across Europe — when the crash occurred near Struga, about 190 kilometers (120 miles) from Skopje, on Wednesday.
Following the collision, Vladimir Cepuljoski, 67, died of injuries while being transported to a hospital in Skopje. His wife, Margarita, remains in critical condition.
The Britons were arrested on provisional charges of endangering traffic and abandoning an accident victim, police spokesman Ivo Kotevski said on Thursday. The offenses could lead to a one-year prison sentence if convicted.
Kotevski said Morley was in police custody for a maximum of 30 days after being questioned by a magistrate in Struga. McConvile was released, but it was not immediately clear whether charges against him would be dropped.
"Two British citizens left the scene of an accident. Shortly afterward, border authorities found them in another (car) ... at the Qafasan border crossing with Albania," Kotevski said.
The rally, based on the 1970s road trip movie, was canceled on Thursday as a mark of respect for Cepuljoski, race founder Maximillion Cooper said in a statement.
"This is the first time anything like this has happened in nine years of traveling through over 40 countries with thousands of drivers," Cooper said.
The race started on Sunday in London, and was to wound through 16 countries before ending in London on Saturday.