A senior Afghan peace negotiator and close ally of President Hamid Karzai was shot dead Sunday, dealing a major blow to Kabul's efforts to broker peace with Taliban insurgents.

Arsala Rahmani, a former minister in the Taliban regime, was a "key negotiator" in the High Peace Council (HPC) established by Karzai to hold talks with the insurgents.

"Shortly after leaving home he was hit by a single bullet from a passing car" as he was driving to work in Kabul, Rahmani's grandson Mohammad Waris told AFP.

The Taliban, who have waged a decade-long insurgency aimed at toppling Karzai's government, threatened earlier this month to target members of the HPC as part of their "spring offensive".

Taliban spokesman Zabihullah Mujahed, however, denied involvement in Sunday's killing. The rebels are known to deny high-profile assassinations and attacks with many civilian casualties.

Tributes to Rahmani and condemnation of his killing poured in from President Hamid Karzai, neighbouring Pakistan, the UN, the US embassy and NATO's International Security Assistance Force (ISAF).

"Enemies of the Afghan people once again proved that they fear peace in Afghanistan and resort to targeting those who seek dignity and prosperity for Afghanistan and are working to ensure peace and welfare in their country," Karzai said.

Pakistan is accused by the US and the Afghan government of harbouring Taliban leaders. But the foreign ministry said in a statement: "Our two countries face the common threat of terrorism, and Pakistan is committed to work closely with Afghanistan to eliminate this scourge.

"Pakistan would continue to support all efforts that contribute to an Afghan-led and Afghan-owned peace and reconciliation process in Afghanistan."

ISAF said: "Rahmani, a former Taliban member, chose to make a positive contribution to his nation by turning his back on an insurgent movement that continues to be wholly detrimental to the future of Afghanistan."

The HPC was established by Karzai in 2010 to negotiate peace with the Taliban and other insurgents waging war against his administration and some 130,000 US-led NATO troops.

Rahmani "had recently established contacts with senior Taliban leaders", a senior security official told AFP, requesting anonymity because he was not authorised to speak to the media.

The Taliban have publicly rejected Karzai's calls for peace, calling him a puppet of the Americans and insisting on the complete withdrawal of Western troops.

The Islamic militants in March pulled out of preliminary talks with US officials in the Gulf state of Qatar, saying Washington had not fulfilled agreed confidence-building pledges, among them releasing five Taliban leaders held at the US military prison in Guantanamo Bay.

For its part, Washington has consistently said any talks with the Taliban to end the war could only take place with the agreement of the Afghan government, which eventually should lead the process.

Rahmani, who was the Taliban's higher education minister during their rule from 1996 to 2001, joined Karzai's government after the regime was toppled by a US-led invasion in the wake of the 9/11 attacks by Al-Qaeda on New York and Washington.

He was one of several former Taliban leaders who were removed from a UN sanctions list last July after lobbying by Karzai's administration in a bid to help the peace process.

Rahmani was known to have maintained ties with some Taliban leaders after joining Karzai's government. Before joining the HPC, the former Taliban leader was a member of the senate, appointed by Karzai.

His death is the second major blow to Karzai's US-backed peace efforts in less than a year. The former head of the council, ex-president Burhanuddin Rabbani, was killed last September by a suicide bomber posing as a Taliban peace envoy.

Karzai last month appointed Rabbani's son, the US-educated Salahuddin Rabbani to replace his father.