The killing came two weeks after Karzai’s powerful brother was gunned down in the city and is a further setback for US-led efforts to control the Taliban’s spiritual home as foreign troops start to withdraw.
The suicide bomber detonated explosives hidden in his turban and killed Mayor Ghulam Haidar Hameedi, who was talking to locals in the courtyard of Kandahar’s city hall, said police chief Abdul Razeq.
Those involved in the talks said Hameedi had been discussing a land dispute with residents after he ordered the destruction of some illegally built homes and two children reportedly died during demolition work on Tuesday.
“In a suicide attack by a (volunteer) in Kandahar municipality, mayor Hameedi... is murdered,” said Taliban spokesman Qari Yosuf Ahmadi in a text message to AFP.
Kandahar - home to President Karzai’s family and scene of some of the war’s bloodiest fighting over the course of a decade - is a hotbed of tribal rivalries over local influence and money.
Kandahar-based analyst Yunos Fakoor said Hameedi, who had lived for years in the United States until he took his post in 2006, had a reputation for resisting corruption in the volatile region and was also an important Karzai ally.
“(He) was under direct support of the Karzai brothers. Kandahar-wise, it is again another big loss for President Karzai,” said Mr. Fakoor.
Hameedi escaped an attack on his car in 2009, though his last two deputy mayors were both shot dead in 2010, and the Kandahar province police chief and its deputy governor have also been killed this year.
The president’s half-brother Ahmed Wali Karzai, known as the “king of Kandahar” was shot dead in his home in the city by a close friend two weeks ago, in a killing also claimed by the insurgent group.
Wali Karzai’s death was followed a few days later by the assassination of Jan Mohammad Khan, a senior adviser to Karzai and the former governor of the southern province of Uruzgan.
The new US ambassador to Kabul, Ryan Crocker, condemned the latest killing as “horrific”, but cautioned that the string of assassinations did not signal defeat for coalition efforts in Kandahar.
Comparing the recent violence to political killings during his tenure as ambassador in Iraq, Mr. Crocker said assassinations could reflect the Taliban’s inability to mount more organized attacks.
“Afghans are pretty tough people and it may well be that their reaction to all this is to get pretty pissed off if they perceive that it’s the Taliban trying to undo the progress that’s been made,” Mr. Crocker told reporters.
With no obvious successor to Wali Karzai, who pinned together the area’s corrupt commercial, political and security networks, there are forecasts that recent security gains made by foreign troops could be reversed.
The avowedly anti-Taliban Wali Karzai maintained an uneasy alliance with US forces and he allegedly informed for the CIA, but he was accused of being a corrupt authoritarian who controlled much the area’s militia and drug trade.
NATO troops mounted a summer campaign last year for control of Kandahar province, with US commanders saying that fragile progress has been made across outlying districts, although they are far from defeating the insurgency.
The latest killing comes after the first phase of security transitions from foreign to local forces’ control.
Seven parts of the country were ceremonially handed over to Afghan forces last week, although NATO officials say it will be up to two years before each area will assume full control for security and governance.
Critics have said the process is premature because Afghan forces are not ready to hold off the Taliban, and they say it is motivated by a political timetable as coalition nations start to bring some of their troops home.
All Western combat troops are due to leave by the end of 2014.