Mian Ramzan, the head of Pattan municipality, was shot and killed by four masked assailants inside a shop, police officer Junaid Ahmad said on Tuesday.
In another incident, at least six separatists were killed in an overnight gun battle with soldiers, officials said.
Ramzan was elected in February's municipal elections, which were opposed by separatist groups, who have been fighting Indian forces since 1989, seeking independence for Kashmir or its merger with neighbouring Pakistan.
Ahmad said two of Ramzan's bodyguards and a policeman were also killed when they tried to chase the killers.
Pattan is about 330km south of Jammu, the winter capital of Jammu and Kashmir state. No one claimed responsibility for Ramzan's assassination.
In Poonch district, overnight fighting took place after soldiers on patrol saw armed men crossing the Line of Control that divides the Kashmir region between India and Pakistan, Lieutenant-Colonel D K Badola, an army spokesman in Jammu, said.
In an hour-long gun battle that followed, at least six of the infiltrators were killed, Badola said.
India accuses Pakistan of arming and funding separatists, who cross over into India to carry out attacks in Kashmir and elsewhere.
Pakistan denies the charges, saying it only offers them diplomatic and moral support.
More than 66,000 people, mostly civilians, have died in the 15-year conflict.