Muhammad Khan, chairman of a village defence committee in Swat district, was shot dead along with his police guard by the assailants, police said.
Another policeman was injured in the firefight, they said.
The injured cop has been admitted to hospital but his condition was stated to be critical.
Khan was going towards market from his home when the gunmen intercepted him and shot him multiple times before escaping.
More than 50 peace committee members and over 20 policemen have so far been killed in suck attacks in Swat since 2010.