"One person was killed instantly, another opposition supporter was hospitalised and several others had minor injuries," a local police officer, who declined to be named, told AFP by telephone.
Sri Lankan elections have been marred in the past by violence but Tuesday's shooting, near the town of Hungama in the south of the island, was the first fatality in the run-up to the vote.
The US embassy in Colombo said it was "deeply concerned" over the killing and escalating violence in the run-up to the January 26 presidential election and urged the authorities to ensure a free and fair poll.
In a statement it said it hoped the "election is conducted freely, fairly and without violence."
"We urge the appropriate authorities to conduct a full investigation of this and other acts of violence and to protect those exercising their democratic right to support the candidate of their choice," the statement said.
Fonseka, a former general, quit the army and entered politics in November over differences with President Mahinda Rajapakse, who accused him of trying to seize power after crushing separatist Tamil Tiger rebels.Rajapakse, standing for re-election, called the poll two years ahead of schedule in a bid to ride a wave of public acclaim after the rebels' defeat and the killing of their notorious founder, Velupillai Prabhakaran.
Victory over the rebels in May brought decades of ethnic bloodshed on the island to an end, but fears remain over continued friction between the majority Sinhalese population and the battle-scarred Tamils in the north and east.
The Tamil Tigers often used violence to stop voting and also carried out suicide bomb attacks and assassinations in the run-up to previous elections.
Fonseka suffered serious injuries in 2006 when he was targeted by a female suicide bomber inside the army's headquarters.