Former ruling party lawmaker and advisor to the president, Bharatha Lakshman Premachandra, was pronounced dead shortly after being taken to hospital following a clash with a ruling party legislator who was also critically hurt.
Police said the two men were taken to separate hospitals along with dozens of their supporters who were also wounded.
One of Premachandra's bodyguards was also killed.
Official sources said the pair were slain by a group led by ruling party legislator Duminda Silva, who was also critically wounded in the gunbattle.
The two men had been bitter rivals, competing with each other for political influence in Colombo.
A local curfew was declared in the Kolonnawa area where the shooting took place after supporters of the two groups set fire to vehicles and blocked roads, police said.
No other incidents of violence were reported during the nine-hour voting period in and around the capital.
There was no immediate comment from the ruling party.
Rajapaksa's ruling coalition, the United People's Freedom Alliance, is fielding candidates for the important Colombo municipality as well as 22 others, marking the final phase of local elections which began in March.
Since government troops claimed victory in their near 30-year war against Tamil Tiger rebels, Rajapakse has tightened his grip on power by securing a second presidential term and winning parliamentary polls last year.
His party has expressed confidence that it will sweep all of the council elections while the fractured opposition has promised a comeback after a string of humiliating defeats.
Voters were electing 420 members from among 6,488 candidates. Results were due by Sunday. The councils are responsible for maintaining utilities, but have no legislative powers.
However, political parties consider it important to secure the local bodies as a stepping stone for wider national elections which are due by 2016.
Local elections began in March with smaller village councils going to the polls initially. The bigger councils saw voting delayed until the completion of the cricket World Cup which the island co-hosted in March and April.
Copyright AFP (Agence France-Presse), 2011