Jan Mohammad Khan, the former governor of southern Uruzgan province and a key ally of the embattled president, was killed in an attack that was still ongoing, according to police in the area.
A senior police official said a second man was also killed -- a member of parliament from Uruzgan, Mohammad Hashem Watanwal -- and an interior ministry official confirmed there had been a second death.
The attack comes less than a week after the president's half-brother Ahmed Wali Karzai was assassinated by a close friend at his home in the southern province of Kandahar, birthplace of the Taliban.
Sunday also marked the beginning of the national process of handing responsibility for security from foreign forces to Afghans, and the last day in the job for the top US commander in Afghanistan General David Petraeus.
"He (Khan) was very close to Karzai. He was as important as AWK (Ahmed Wali Karzai)," said the government official, speaking on condition of anonymity.
An AFP reporter at the scene said there were dozens of security forces in the area. The adviser's house was in darkness as all power had been cut off to the surrounding area and the road leading to its driveway was blocked off.
No gunshots could be heard, but police said they were continuing to clear the area.
"There has been an armed attack by at least two gunmen on the house of the former governor of Uruzgan. Shooting is continuing," said interior ministry spokesman Siddiq Siddiqi.
A spokesman for Kabul police, Hashmat Stanikzai, said the attack began at 8:00 pm (1530GMT) and was ongoing.
Like Karzai, Khan hailed from a powerful family from the Popalzai tribe in Afghanistan's restive south and was his key adviser for tribal issues.
According to the independent website afghan-bios.info, Khan's nephew runs a 3,000-strong militia in Uruzgan.
Khan escaped a previous assassination attempt on August 4 when a motorcycle bomb exploded by his convoy in the southern province.
His death could further inflame the volatile politics of the southern region, where the Taliban are battling US-led troops for control of the area.
Analysts have already warned that Tuesday's killing of Wali Karzai may trigger a turf war for control of the critical southern heartland that could embolden the Taliban and reverse NATO gains.
The deaths come at a critical juncture, just days after 3,000 Canadian troops ended their combat mission in Kandahar and in the same week that Washington began troop draw-downs, a gradual process due to end in late 2014.
Copyright AFP (Agence France-Presse), 2011