"The armed gunmen opened fire on police and unfortunately, very suddenly, killed the chief police of Kandahar," he said.
At least five other police officers were wounded in the shooting, Bashary said.
Hours later, Thoryalai Wesa, the provincial governor, said 41 private guards had been disarmed and arrested and would be sent to the Afghan capital, Kabul, for a military trial.
But before the arrests, Hamid Karzai, the Afghan president, in a strongly worded statement demanded that US coalition forces hand over the security guards involved in the shooting.
The president called for the "immediate handover by the coalition forces to the Afghan government of the private security guards involved in the killing of Kandahar province security officials", a statement said.
"President Karzai said that such incidents negatively impact the state-building process in Afghanistan and called upon coalition forces to avoid actions that weaken the government," it said.
David Chatar, Al Jazeera's correspondent reporting from Kabul, said that the US-led coalition had released a statement saying no coalition forces were present at the time of the gunfight.
The statement said that the guards were contractors for a private security firm loosely affiliated with coalition forces, our correspondent said.
"It was only after that statement was issued by President Karzai that we suddenly hear that 41 of these Afghan security guards were arrested," he said.
"[They were] apparently arrested on the military base just outside Kandahar. That's the Americans' second largest base."
Chater said the incident raises "embarrassing questions" for the US-led coalition.
"But the point is there have been many questions raised before about the coalition forces, and particularly the Americans, using these security firms and using these Afghans - some of them with criminal records - to work with them for security," he said.
Kandahar in southern Afghanistan is a Taliban stronghold, where fears of mounting violence have grown ahead of key presidential and provincial council elections in August.
Chater said Monday's shooting does nothing to help Karzai in the run-up to the election in which security is a key issue.
"As far as the president is concerned, this is a big blow to the government here," he said.
"It undermines his attempts to keep his government going and we're right in the middle of an election campaign."