Security officials said three police guards were also wounded in the attack on Monday which came a week before by-elections for four seats for the Jammu and Kashmir state assembly.
Ali Mohammad Naik, a former legislator and senior leader of Kashmir's main opposition party, National Conference, was the apparent target of the attack.
A police officer told Reuters that Naik was coming out of his house when he was shot: "A volley of gunfire by militants wounded Ali Mohammad Naik and his four guards."
One of the guards died.No group declared responsibility for the attack which occurred near Tral township, south of Srinagar, the summer capital of Jammu and Kashmir state.
Tens of thousands of people have been killed in the region since a separatist revolt erupted in 1989.
Islamists fighting New Delhi's rule of Kashmir - claimed by both India and Pakistan - have stepped up attacks in the past few days.
Five people were killed and 40 wounded in a wave of grenade attacks in Srinagar on Friday.
But officials say overall levels of violence have declined after India and Pakistan begun a peace process more than two years ago.