Khamis al-Obeidi, who represented Saddam and his half-brother Barzan Ibrahim, was abducted from his house at 7am, Saddam's top lawyer, Khalil al-Dulaimi said on Wednesday.
Jaafar al-Moussawi, the chief prosecutor, said that al-Obeidi had been killed.
"They said 'We are from internal security and we need you for questioning'," Qatari attorney Najeeb al-Nuaimi told Aljazeera on Wednesday.
Two hours later, Obaidi's body was dumped on a road beside a poster honouring the father of anti-American Shia cleric Moqtada al-Sadr, who was killed under Saddam in 1999.
"They [three armed men] fired into the air and said 'This is the fate of Baathists!'," said a vegetable seller whose store is close by.
Al-Obeidi is the third defence team lawyer to be killed since the trial against Saddam and seven co-accused on charges of crimes against humanity began in October.
Al-Dulaimi, blaming pro-government militia for killing his deputy, called for a halt to the trial and said Saddam and others were on hunger strike. A US military official, however, said Saddam ate his evening meal. Some other inmates did not.
Al-Khalil (R) blames the easing of
security by the US for the killing
Al-Dulaimi told Reuters the hunger strike, not the first of its kind, would go on until Washington improved security for his team.
Bushra al-Khalil, one of the defence lawyers, blamed the US for the killing, citing an easing of security procedures.
"I felt a change in procedures," she told Aljazeera on Wednesday.
Al-Khalil said that previously "we were taken by helicopters from Baghdad airport into the Green Zone and [we would] live in the US military area".
"However, the last time, I found that they are taking us overland and letting us mix with people at the airport.
"This was not happening in the past. The Americans were responsible for sure. I expected the assassination because they wanted to obstruct our defence."
The killing came two days after the chief prosecutor demanded the death penalty for Saddam and three of his former top aides for their roles in a crackdown on Shia villagers after a 1982 attempt on the ousted leader's life.
Unlike al-Dulaimi, who shuttles between Amman, Jordan, and the Iraqi capital, al-Obeidi chose to continue to live in Baghdad despite the tenuous security.
Al-Dulaimi blamed the interior ministry, which Sunnis have alleged is infiltrated by so-called Shia death squads.
"We strongly condemn this act and we condemn the killings done by the interior ministry forces against Iraqis," he said, adding that US-led forces also bore responsibility because the war had allowed Shia militias to gain influence.
Also on Wednesday, armed men abducted 80 or more factory workers travelling home in a fleet of buses just north of Baghdad, police and interior ministry sources said.
Five busloads of employees from a factory in Taji, north of Baghdad, were commandeered by dozens of armed men, officials said. One source put the number of those kidnapped at at least 100.
The area sees significant Sunni Arab anti-government activity.