Police and troops mounted a follow-up operation but there was no immediate claim of responsibility for the shooting.
Armagh Ulster Unionist councillor Jim Speers, a lifelong friend of the dead man, said: "This was savagery. The Government has got to stop pandering to terrorists."
Mo Mowlam, Secretary of State for Northern Ireland, condemned the killing as "cowardly and contemptible".
Newry and Armagh MP Seamus Mallon said that the perpetrators were determined to make sure there would be no peace settlement.
Mr Mallon, deputy leader of the SDLP, added: "The vast majority of people must recognise the threat to peace and to the will within the community for an agreed political settlement."
Later last night a second man was shot and wounded in the Ardoyne area of Belfast.
The IRA is supposed to be observing an eight-month-old truce as the price for Sinn Fein participation in peace talks being held at Stormont. But police say that IRA members disillusioned with the negotiations have broken away to continue attacks.
Critics alleged yesterday that a passage in a leaked Northern Ireland Office document containing a section on opinion polling exposed a plan to manipulate the media. It stated: "It will be important to ensure that not all of the results of opinion polling etc will be in the public domain. It would be open to us to encourage some degree of public opinion polling where we believe the results are likely to be supportive."