Nadaraja Raviraj, a member of parliament from the Tamil National Alliance (TNA) was shot at on Friday by men on a motorcycle as he drove to work, police said.
One of Raviraj's guards was also shot dead.
"[Raviraj] is a lawyer also and he was going to the court when some people came and fired at him," said K. Sivajilingam, a fellow member of parliament.
Raviraj was one of 22 MPs from the TNA, which is widely regarded as a proxy of the Liberation Tigers of Tamil Eelam (LTTE).
Sri Lanka's military said it sank two Tamil Tiger suicide boats in a clash on Friday.
Military officials said the navy had spotted two Tiger boats hidden among fishing boats in seas off the eastern district of Trincomalee and opened fire.
That clash came after the military said it had destroyed 22 rebel vessels off the island's northern tip late on Thursday. The Tigers were not immediately available for comment.
On Thursday the TNA had petitioned the United Nations to intervene to protect civilians from both Sri Lankan army troops and Tamil Tiger fighters, after Sri Lankan army shelling killed at least 23 Tamil civilians in the east on Wednesday.
The TNA also said 41,000 Tamil civilians have been displaced in the Batticaloa region due to the fighting.
Tiger rebels have been fighting for a separate homeland for the Tamil minority in the Sinhalese-majority island for over 30 years.