Arsala Rahmani was a former Taliban official who reconciled with the government and was active in trying to set up formal talks with the insurgents. His assassination follows that of the council's head last year.
He was shot at an intersection in western Kabul by a gunman in a white Toyota Corolla while being driven to his office, said Mohammad Zahir, head of the city police's criminal investigation division. He did not have a bodyguard with him at the time.
"Only one shot was fired," Zahir said. "Our initial reports are that it was a pistol with a silencer. Rahmani died on the way to the hospital." Zahir said an investigation was under way.
The Taliban denied responsibility for the killing, although they had earlier indicated that they would target peace negotiators.
Rahmani was one of about 70 influential Afghans and former Taliban appointed by President Hamid Karzai to the council to try to convince insurgent leaders to reconcile with the government.
The Taliban have refused to have direct contact with the council, which they consider to be an organ of Karzai's government. They have said publicly in the past that they do not want to negotiate with Karzai or his administration, which they consider a puppet of the United States.
Privately, however, some representatives of the Taliban who are open to negotiating a settlement have met with U.S., Afghan and other international officials. Rahmani, along with other members of the peace council, was trying to forge relations with those Taliban amenable to peace talks.
It was unclear if a faction within the Taliban opposed to negotiations could have been responsible for the shooting.
The U.S. has backed the council's efforts to pull the Taliban into political discussions with Kabul as part of its strategy for reducing violence and turning over responsibility to Afghan forces so international combat troops can go home or move into support roles by the end of 2014.
But this effort suffered a major setback in September 2011 when former Afghan President Burhanuddin Rabbani, who was head of the peace council, was assassinated by a suicide bomber posing as a peace emissary from the Taliban. Kabul blames Pakistan-based leaders of the Taliban for his killing, though the Taliban denies this.
The U.S. has its own contacts with the Taliban, but in March the militant organization said they were suspending contacts with the United States over what they said was a lack of progress in releasing Taliban prisoners from U.S. detention in Guantanamo.
The last substantive discussions between U.S. officials and Taliban representatives were in January, and both initiatives to build trust and move toward real peace talks are in limbo.
A year ago, U.S. Secretary of State Hillary Rodham Clinton said the United States was launching a "diplomatic surge to move this conflict toward a political outcome."
The alternative to a political resolution is a protracted conflict that neither the war-weary Afghans, Americans or Europeans want or can afford.
On Twitter, the U.S. Embassy in Kabul called the assassination of another peace council member "a tragedy."
NATO praised Rahmani for "turning his back" on the insurgent movement and said his contributions will be missed.
"The only possible aim of this attack is to intimidate those, who like Rahmani, want to help make Afghanistan a better place for its citizens and the region," the coalition said in a statement.
Afghan Foreign Ministry spokesman Janan Mosazai said work toward reconciliation with the Taliban would continue despite Rahmani's killing.
"No one but the sworn enemies of peace in Afghanistan and the region would commit such a heinous act," he said in a statement.
Pakistan, which has in the past has been accused of not doing enough to help the peace process, condemned the killing and said it was "committed to work closely with Afghanistan" against terrorism.
Pakistan is home to most of the Taliban leadership as well as the Haqqani network, which carries out major attacks in Afghanistan. Islamabad believes it should have a say in any talks involving its neighbour, which it fears will develop an alliance with its archrival, India.
Karzai has previously called on Pakistan to bring the Taliban to the negotiating table.
Rahmani, who was in his 70s, served as deputy minister of higher education during the Taliban regime, which ruled Afghanistan for five years and sheltered al-Qaida before being driven out of power in the U.S.-led invasion in late 2001. He reconciled with the government established in Kabul after the Taliban's fall and subsequently served in parliament.
Rahmani was one of several former members of the Taliban who were removed from a U.N. blacklist in July 2011. The decision by a U.N. committee eliminated a travel ban and an assets freeze against Rahmani and the others — a move seen as key to promoting the peace effort.
Taliban spokesman Zabiullah Mujahid said in a statement that his group had nothing to do with Rahmani's assassination.
When they announced the start of their annual "spring offensive" earlier this month, the Taliban said that members of the peace council — who they view as government collaborators — would be among their primary targets.
The offensive, which comes every year as the weather warms, normally leads to an increase in attacks as the insurgents seek to intimidate the government and retake territory lost over the winter.
Elsewhere, the U.S.-led coalition said two service members were killed Sunday in an attack in eastern Afghanistan. NATO did not provide details about the attack or the nationalities of those killed.
Associated Press writer Deb Riechmann in Kabul contributed to this report.