"Ten minutes ago, he was attacked by armed men outside his home near the governorate building. He died instantly," said Kirkuk police chief General Turhan Yussef.

"One of his bodyguards was seriously wounded."

Talabani, a cousin of Kurdish political chieftain Jalal Talabani, headed security for the Northern Oil Company (NOC), which presides over oil production in northern Iraq.

The security chief's body was riddled with bullets and delivered to the morgue in Kirkuk, 255 kilometres north of Baghdad.

The killing was the third major assassination since June 12 when the country's deputy foreign minister was shot dead on his way to work in Baghdad, followed the next day by the murder of an education ministry official.

Talabani was the key link between US forces and NOC and the private security firm Erinys as they tried to shield Iraq's northern fields from attacks.

It was a largely futile battle as constant sabotage on the north's main export line from Kirkuk to the Turkish Mediterranean terminal of Ceyhan had effectively shut down the route since the fall of president Saddam Hussein in April 2003.

Talabani, 54, who studied in Germany and formerly worked as an engineer for NOC, was charged with the company's security dossier after Saddam was ousted from power. He was very close to his powerful cousin Jalal.

The killing could aggravate the oil-rich city's ethnic tensions, with its volatile melting pot of Kurds, Arabs and Turkmen.