Police said the gang members, who came on two motorcycles attacked the councillor Meenakshi Sundaram when he came out of his office, and fled from the spot.
Police has seized a knife used by the gang.
People in the area ran helter-skelter on seeing the gang attacking the councillor, who is also president of the Rajapalayam Agricultural cooperative bank, and secretary of the MGR Youth wing.
Sundaram was also into real estate business.
Police are investigating the reasons for the murder.