Tarling, 19, was a Welsh time trial specialist who had joined the NSN Development Team last year.
"We are heartbroken to announce the passing of Finlay Tarling at the Volta a Portugal today," his team said. "Fin was a much loved member of our team but most importantly, he was a son, a brother, and a friend to so many. He will be deeply missed."
Race officials said in a statement: "The organisation of the Volta a Portugal and the Portuguese Cycling Federation express their most heartfelt condolences to the family of Finlay Tarling, to his teammates, to the NSN Development Team, and to all his friends and loved ones.
"In light of this tragic event, the race will be neutralised until reaching Fafe and, as a sign of respect and mourning, the podium ceremony scheduled for today will not take place."
Portugal's RTP broadcaster said Tarling was hit by a non-race car driving in the opposite direction.
Portuguese President Antonio Jose Seguro expressed his condolences, saying Tarling's death had "plunged the peloton, the tournament and the host nation into mourning."
