According to newspaper Correio da Manhã (CM) the dead woman was found with her hands bound, which has led authorities to suspect she may have been murdered.
The charred body was found inside a car at an isolated spot between Loulé and Quarteira, shortly after 8pm.
Initially, CM reports, GNR police were called to the scene, but after they found signs of a possible murder - namely the fact the woman’s hands were tied – the investigation was passed over to the PJ police.
CM claims the woman had a history of drug use and had been reported missing for two days.
Authorities have revealed no further details about the victim or the circumstances surrounding her death.
Earlier this summer, in June, a similar incident occurred in Loulé when a 67-year-old local businessman was found shot inside a burnt-out car, also in a remote spot.
The man survived the ordeal, which may have been a settling of scores or a crime of passion, CM said.
He was identified by the newspaper as Manuel d’Almeida, the owner of a churrasqueira restaurant, who was found with serious burns and a shot-wound to his face, lying next to his BMW which had been taken to an isolated spot, near the local fire station, and set on fire.
The victim was taken in a serious condition to Lisbon’s Santa Maria hospital.