in special questions the correct form is 'where was she' because it is a question but ''he asked me where she was'' isn't a special question it is a reported speech.so in reported speech don't use the formation of special questions

The first one is right. He asked me where she was. (*^__^*)

You can say: He asked me where she was. (indirect speech) OR He ask me: "Where was she?" . (direct speech)

Rainnie you can ask,,where was she last night?'' it is a special question

1. He asked me where she was. It is the correct form. 2. He asked me, "Where is/was she?" First sentence is an example of indirect speech or reported speech, in which a someone's question or saying is reported like this. Second sentence is an example of direct speech, where the exact words of the speaker are used by placing them in inverted commas.