Ricardo Guzman, the mayor of La Piedad in the Michoacan state, was killed as he campaigned for the candidate hoping to succeed him in local elections later this month, state prosecutor Jesus Montejano said.
Guzman is the sixth Mexican mayor to be assassinated this year and the 20th since 2010, with most of the killings linked to organized crime.
The president's sister Luisa Maria Calderon, the PAN candidate for governor, paid tribute to Guzman in comments to local television, describing him as "an excellent mayor".
Michoacan is one of the areas hit hardest in Mexico's brutal drug war. Voters there will go to the polls on November 13 to elect a new governor and 113 mayors.
More than 45,00 people are believed to have been killed since 2006, when the government launched a massive military crackdown against powerful drug cartels who are battling among themselves over the lucrative drug trade.