Archbishop Michael Courtney was shot in the head, shoulder and a limb and died during surgery at Prince Louis Rwagasore Hospital, a hospital official said.
President Domitien Ndayizeye said the 58-year-old Courtney was deliberately targeted. "It was not an accident; he was killed," Ndayizeye told reporters. He and other officials, however, did not say what the motive for the killing might be.
The shooting took place in an area about 30 miles south of the capital, Bujumbura, on Lake Tanganyika that is a stronghold of rebels of the National Liberation Forces, or FLN, the only group that has not signed a peace deal with the transitional government. The FLN denied responsibility in the killing.
"The assailants had planned to kill him," Annicet Niyongabo, governor of Bururi province, said. "They first fired into the tires and then approached to execute him. They could not mistake the car for another one because it was flying the Vatican flag."
The gunmen had killed a soldier at the site just before the car arrived.
The attack occurred just outside Minago in Bururi province on the main road north towards Bujumbura. Courtney was returning from further south in the province where he had attended the funeral of a Burundian priest whose body had been repatriated from Rome two days earlier, Emile Hicintuka, a local official said.
Major violence has torn Burundi for a decade. Conflict broke out in 1993, when rebels from the Hutu majority took up arms after Tutsi paratroopers assassinated the country's first democratically elected leader, a Hutu.
Three rebel groups, including the largest, have signed peace deals with the government, agreeing to join the transitional government and integrate their forces into a new national army. However, the National Liberation Forces, or FNL, continues to fight.
Pasteur Habimana, an FNL spokesman, denied charges that the group was responsible for Courtney's death.
"We knew where he lived ... We could have killed him if we wished. We strongly condemn those who killed him," he said.
Maj. Kandeke, the army commander in the region where the shooting occurred, said the FNL had attacked the market in Minago on Saturday. "We are still fighting them," he said.
Courtney was "one of the church's most experienced diplomats," with over 30 years of work in the church, according to the Vatican's 2000 announcement of his appointment in Burundi.
Courtney was born in 1945 in Nenagh, 85 miles southwest of Dublin. He was ordained in 1968, and worked as a parish priest around Ireland until 1976, it said. He then moved to Rome and entered the Pontifical Diplomatic Academy.
Beginning in 1980, he was a papal representative in South Africa, then in Zimbabwe, Senegal, India, Yugoslavia, Cuba and Egypt, the 2000 announcement said. Prior to going to Burundi, he worked for five years as special envoy in Strasbourg, France, monitoring the Council of Europe and the European Court of Human Rights.
By Michel Rwamo