Lakshman Kadirgamar, an ethnic Tamil, was killed in an attack which Sri Lankan police are blaming on the island's Liberation Tigers of Tamil Eelam (LTTE) separatist rebels.
The rebels have denied involvement in the killing and said the government must look "inwards" to get at the killers.
The LTTE said in a statement that forces within the government were trying to sabotage a Norwegian-arranged truce by resorting to violence and blaming them.
The shooting comes amid escalating tensions between the government and the rebels who have repeatedly threatened to resume a two decade civil war because of a rash of violence in the east of the country.
Kadirgamar, 73, was hit by several bullets in the head and chest as he returned to his tightly-guarded private residence in the centre of Colombo about 11pm (17:00 GMT), army chief Shantha Kottegoda said.
There was no immediate claim of responsibility for the killing, but Kadirgamar himself had often publicly said he was a target of the LTTE.
Military spokesman Brig. Daya Ratnayake said police in the past week had arrested two Tamil men who were taking video of the area around Kadirgamar's house.
"We have reasons to believe that he was killed by the Liberation Tigers of Tamil Eelam," said Ratnayake. "He was always under threat."
Police said they found spent ammunition near the scene in an upmarket Colombo suburb and launched a large-scale manhunt for two snipers, with police setting up road blocks and air force helicopters circling the sky.
Kadirgamar was rushed to the
National Hospital, but in vain
Kadirgamar had been a key figure in President Chandrika Kumaratunga's government, leading an international campaign against the Tigers, who have been outlawed in several countries, including the United States and Britain.
The minister had attended an official function and driven back to his private home for a swim when he was shot several times, officials said.
"He was at his home when he was hit by a sniper," Kottegoda said. "He had just returned from an official function near his house when the attack took place."
The veteran minister was rushed to the National Hospital, where four neurosurgeons and cardiothoracic surgeons struggled for 70 minutes to save his life, hospital spokeswoman Pushpa Soysa said.
Kadirgamar was the most senior Sri Lankan leader to be assassinated since a bomb attack killed president Ranasinghe Premadasa in May 1993.
A close confidante of Kumaratunga, he was one of the most tightly guarded ministers in the Sri Lankan cabinet and had nearly 100 elite bodyguards to protect him.
President Kumaratunga herself had escaped an assassination attempt but lost her right eye in the December 1999 bombing blamed on Tigers. She, however, invited Norway to help bring the Tigers to the table in January 2000.
A house-to-house search was on
for the snipers
Police had only a few days before the killing drawn up plans to further improve Kadirgamar's security with the deployment of additional guards.
The military and police late on Friday stepped up security in the capital as part of their manhunt for two men they believe were the snipers who had taken up position about two doors from the minister's private residence.
"We have found spent ammunition at a house nearby," a police official said.
A house-to-house search for the snipers was launched in the Buller's Lane area of the Cinnamon Gardens residential quarter, police said.
All vehicles entering and leaving the city were thoroughly checked, while the air force brought in helicopters for aerial surveillance.
Kadirgamar, a member of the minority Tamil community and a native of Jaffna, the heartland of Tamil separatism in the island-nation's north, was also a vociferous opponent of the Tamil Tiger rebels.
The Tigers refused to acknowledge him as a member of their community and dubbed him a traitor to their cause.
Oxford-educated Kadirgamar had been foreign minister under Kumaratunga since 1994, with a break between 2001 and 2004, and claimed credit for getting the Tigers declared a terrorist organisation in several countries.
In the Norwegian capital Oslo, a leading mediator said the assassination was a major setback in Sri Lanka's peace process.
"It is completely insane, it is a major setback for the peace process"
"It is completely insane, it is a major setback for the peace process," said Erik Solheim, a leading Norwegian mediator trying to engineer a lasting peace deal between the government and the LTTE.
"The identity (of the assassin) is not clear, but it is evident that suspicion will fall first on the Tamil Tigers," he told AFP.
Norway helped broker a 2002 ceasefire that appears to be on increasingly shaky ground amid increased violence in the country since February.