The space-skimming flight was supposed to last an hour and couldn't release the mock satellites into space as planned. The spacecraft reached nearly 90 miles (150 kilometers) in altitude before trouble struck. It was not immediately clear where it came down.
"Unfortunately this happened last time too, so we have some practice at this now," SpaceX flight commentator Dan Huot said from the launch site.
NASA has booked Starship to land its astronauts on the moon later this decade. SpaceX's Elon Musk is aiming for Mars with Starship, the world's biggest and most powerful rocket.
Like last time, Starship had four mock satellites to release once the craft reached space on this eighth test flight as a practice for future missions. They resembled SpaceX's Starlink internet satellites, thousands of which currently orbit Earth, and were meant to fall back down following their brief taste of space.
Starship's flaps, computers and fuel system were redesigned in preparation for the next big step: returning the spacecraft to the launch site just like the booster.
During the last demo, SpaceX captured the booster at the launch pad, but the spacecraft blew up several minutes later over the Atlantic. No injuries or major damage were reported.
According to an investigation that remains ongoing, leaking fuel triggered a series of fires that shut down the spacecraft's engines. The on-board self-destruct system kicked in as planned.
SpaceX said it made several improvements to the spacecraft following the accident, and the Federal Aviation Administration recently cleared Starship once more for launch.