Burhanuddin Rabbani, a former Afghan president who had been leading the Afghan peace council, was killed in an attack at his home.
NATO's International Security Assistance Force said two suicide bombers, "feigning a desire to conduct reconciliation talks, detonated themselves."
Afghan officials earlier said there was one bomber.
The attacker hid the explosive device inside his turban, said Hasmat Stanikzai, spokesman for Kabul police.
An Afghan intelligence source told CNN that the bomber arrived at the house at the same time a meeting was due to take place between Rabbani and a delegation representing the Taliban insurgency.
Killing exposes fragility in AfghanistanStanikzai said the bomber claimed to be a Taliban member who had come for the talks about peace and reconciliation, and detonated the explosives as he entered the home.
Four other people were wounded, including Masoom Stanikzai, a key adviser to Rabbani, the police spokesman said.
A doctor at a 400-bed hospital in Kabul said, "We have received three people from the blast at Rabbani's house. Among the injured are Masoom Stanikzai, one bodyguard and an assistant" to Rabbani.
Rabbani was long considered crucial to Afghan and coalition efforts to bring Taliban leaders into the reconciliation process.
He was also heading the United National Front Party, the largest political party that stands in opposition to President Hamid Karzai.
Karzai called Rabbani's killing a "very tragic loss" for his country.
Speaking at the United Nations in New York, Karzai described Rabbani as "an Afghan patriot" who "has sacrificed his life for the sake of Afghanistan and for the peace of our country."
"We will miss him very much," Karzai said.
Karzai cut short his time at the United Nations. His office said he would return to Afghanistan in the wake of the killing.
Adm. Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, said of the violence in Afghanistan, including Rabbani's assassination, "We know that is the campaign the insurgents are on. We've got to adjust to that and protect the leaders.
"Someone is going to have to step in very quickly because that is a critical part of the peace process," Mullen said of Rabbani's role. The killing represents the strategy of the Taliban to assassinate as many leaders as possible, Mullen said.
NATO Secretary-General Anders Fogh Rasmussen called the assassination "an attack on the Afghan people as they begin to take their country's security in their own hands."
"To those who offer only death and destruction to the Afghan people, our message is clear: You will not prevail," he said in a statement.
Gen. John R. Allen, commander of ISAF, said the "face of the peace initiative has been attacked."
"This is another outrageous indicator that, regardless of what Taliban leadership outside the country say, they do not want peace, but rather war," Allen said in a statement.
The loud explosion heard in the attack on the home prompted temporary lockdowns at the nearby U.S. Embassy and ISAF headquarters as officials investigated the source of the blast.
Personnel at the U.S. Embassy were instructed to take cover late Tuesday afternoon due to an incident outside the embassy's perimeter, an embassy spokesman said.
"It appears at this time that the embassy was not the target of the incident," spokesman Gavin Sundwall said in a statement. "We are working to account for all embassy personnel and staff."
ISAF headquarters was on lockdown for about 30 minutes, an ISAF spokesman said.
People at the headquarters heard a couple of deep booms followed by sirens, the spokesman said.