Wali Karzai was shot dead on Tuesday morning inside his house by Sardar Mohammad, a bodyguard who regularly visited him, the security source told Al Jazeera.
Mohammad shot Wali Karzai in the stomach and chest as he emerged from a bathroom and was then shot and killed by other bodyguards, the man said.
Hamid Karzai, the president, attended a scheduled press conference on Tuesday afternoon with French President Nicolas Sarkozy and confirmed his brother's death.
"My younger brother was martyred in his house today. This is the life of all Afghan people, I hope these miseries which every Afghan family faces will one day end," Karzai said.
Taliban claims credit
A Taliban spokesman told Al Jazeera that they were behind the killing and had assigned Mohammad to carry it out a "long time" ago. But security sources say the hardline Islamic movement often claims credit for acts it may not have organised, and according to other reports, Mohammad was a longtime employee of the extended Karzai family and was close to Wali Karzai.
The source in Wali Karzai's security team told Al Jazeera that Mohammad was the commander of checkpoints in the town of Karz, the president's hometown, around five kilometres south of Kandahar.
The Taliban's claim of responsibility comes two weeks after a spectacular attack on the Inter-Continental Hotel in Kabul, which they claimed. Nineteen people died in that assault.
In response to the assassination, police mobilised a massive response in Kandahar city, according to Kabul-based journalist Matthieu Aikins, who spoke to a resident.
Checkpoints were "locked down," helicopters hovered overhead, and the road to the hospital, where Wali Karzai's body was taken, was blocked off, Aikins wrote on Twitter.
Super governor' of southern Afghanistan
Wali Karzai was the head of the Kandahar provincial council and considered a tribal elder, but his power extended far further in Afghan business, politics and security. He has been described in various media reports as a "warlord" involved in drug smuggling and as a paid asset of the Central Intelligence Agency.
"He was effectively the super governor of southern Afghanistan," said Al Jazeera's James Bays, who met Wali Karzai on multiple occasions and has reported extensively from the country.
In fact, influential pro-government Kandaharis had lobbied the president as recently as June to appoint Wali Karzai governor of the province, a prospect which seemed close to becoming a reality, Aikins wrote in Harper's magazine. The current governor, Tooryalai Wesa, spent the majority of the past two decades in Canada and was considered far less influential than Wali Karzai.
Amrullah Saleh, the former Afghan intelligence chief, said the government should use Wali Karzai's killing to come together against common enemies: al-Qaeda, the Taliban and Pakistani armed groups.
"Ahmed Wali Karzai was standing against these forces," he said. "This has boosted the morale of our enemies and given them more opportunities to infiltrate our ranks."
"[Wali Karzai's] assassination is a big loss for the president as he helped hold the greater Kandahar region together," Saad Mohseni, the director of the large media group that owns TOLO, wrote on Twitter.
There have been several previous attempts on Wali Karzai's life, and even the United States once warned that they could kill him.
In May 2009, Wali Karzai said he had been ambushed on the road to Kabul by Taliban fighters, who killed one of his bodyguards. Six months earlier, he escaped a Taliban attack on government buildings in Kandahar that left six others dead.
In March 2010, a senior US military official told the Reuters news agency that Wali Karzai could be targeted for killing or capture if it were ever proved that he provided arms or assistance to insurgent groups.
"We'd rather not have a guy like that down there because he's so divisive," the official said. "But there's nothing that we can do unless we can link him to the insurgency."
Allegations of CIA payments
Rumours of Wali Karzai's involvement in Afghanistan's opium trade have circulated in Afghanistan for years. In 2008, the New York Times reported that the White House, State Department and Central Intelligence Agency had received reports that linked him to the drug business and that they tried to convince Hamid Karzai to move his brother out of power.
Wali Karzai had once personally ordered a local commander in the security forces to release a large truck carrying heroin, the newspaper wrote. But he repeatedly denied any role in the drug trade and said he was the "victim of politics".
Confronted once in 2009 by a McClatchy news agency reporter who had interviewed officials and elders implicating him in drug trafficking, Wali Karzai threatened to beat the reporter and ordered him to leave his house.
A year later, the Times reported that Wali Karzai had received regular payments from the CIA for the previous eight years, in part to fund an Afghan paramilitary force that operated at the CIA's direction.
Wali Karzai was paid to allow the so-called Kandahar Strike Force to use a large compound outside the city, and a senior US official referred to him as "our landlord".
