The Yugoslav Defence Minister, Mr Pavle Bulatovic, was shot dead last night by an unknown attacker in a Belgrade restaurant, the government said.
The minister, who had held his portfolio since 1993, was seen as close to President Slobodan Milosevic.
Immediately after the shooting, the government went into emergency session and then issued a statement saying Mr Bulatovic was the victim of a terrorist act.
"The Federal government states with deepest sorrow and sadness that Pavle Bulatovic, federal minister of defence, was killed this evening in Belgrade," the statement, read out on state television, said.
"Minister Bulatovic is a victim of a classical terrorist act," it said. "The Federal government gives full support to the relevant state organs in their uncompromising struggle against terrorism."
Police said the killer struck at 18.55 p.m., firing through the window of the Rad restaurant, which is situated in a soccer stadium.
"The unknown attacker shot from an automatic weapon through a restaurant window," a police statement said. It added that the shooting came from the direction of the pitch.
Mr Bulatovic (51) was a senior member of the Socialist People's Party, a Montenegrin party loyal to Mr Milosevic. Bulatovic frequently visited the Rad restaurant, the friend said, adding: "He felt at home there."
The Minister died less than a month after Serb warlord Arkan, real name Zeljko Raznatovic, was murdered in the lobby of Belgrade's Intercontinental Hotel. He was gunned down on January 15th.
Independent Studio B television said two other men sitting at the same table were wounded and were taken to a military hospital nearby. One of them was a bank director.
A Reuters cameraman at the scene said police had sealed off the street outside the restaurant. Military police were also at the scene.
Mr Bulatovic was born in the Montenegrin village of Gornji Rovci in the northern part of the coastal republic, which together with dominant Serbia forms Yugoslavia. He was married and had three children.