Witnesses said on Monday a red car pulled up alongside a vehicle carrying Agar al-Tawil, a Shia Arab council member, and his bodyguard and opened fire.
The vehicle skidded to a halt and the assailants then got out and fired more shots at the victims. "Two men got out of the red car and went to Tawil's car and just started shooting," witness Haydar Muhammad said.
Major General Hazim al-Ubaidi of the Kirkuk police confirmed the assassination and said an investigation was under way.
Meanwhile, Aljazeera correspondent in Kirkuk reported that Faruq Abd Allah Abd Al-Rahman, head of the Iraqi Turkmen Front (ITF) escaped an attempted assassination while he was on a visit to Kirkuk.
Kirkuk, which sits on some of Iraq's richest oil reserves, is divided among Arabs, Kurds and Turkmen, all of whom lay claim to the city.
During Saddam Hussein's rule, Kurds and Turkish-speaking Turkmen were forcibly driven from Kirkuk and its surrounding lands in an effort to change the ethnic make-up of the area, part of a process known as Arabisation.
Since Saddam's overthrow, Kurds and Turkmen have moved back to the city and are trying to regain lost property.
The Kurds, who have enjoyed effective autonomy in three northern Iraq provinces since the end of the 1991 Gulf War, would like to see Kirkuk become the capital of a federal Kurdish state, a move strongly opposed by Arabs and Turkmen.
Iraqi Kurds want Kirkuk to become
the capital of the Kurdish state
Tensions among the rival groups have flared repeatedly in recent months. A series of demonstrations in December by Turkmen and Arabs opposed to growing Kurdish influence led to the deaths of several protesters.
Kurdish political offices in the centre of the city have been attacked with rocket-propelled grenades and gunfire several times in recent months and in January two Kurds were stabbed to death on the street.