Constable John Reid, 30, from Belfast, who was on patrol with troops near the Irish border just outside Crossmaglen, south Armagh, was struck in the chest.
Security chiefs are now desperate to trace the weapon before the sniper strikes again. The rifle is capable of bringing down a helicopter, and has a killing range of more than a mile.
The officer was the second policeman murdered by terrorists in just over 12 hours. Earlier, Constable Reggie Williamson, 46, was blown up in front of his girlfriend as they returned home from a night out near Moy, Co Tyrone.
Police and soldiers in the border regions are under new pressure to find the IRA rifle - an American-made Barrett (Light Fifty) which is five feet long, weighs 28lbs, fires .50 calibre rounds and has a killing range of up to 1,800m.
PC Reid, a second RUC officer and a group of soldiers had just emerged from a field and were about to set up a roadblock on the Castleblaney Road on the outskirts of the town, when the shot was fired.
The rifle has been used twice before to kill - each time with a single shot. Last August, a soldier was shot in the centre of Crossmaglen and then last November, a policeman on traffic duty in the village of Belcoo, Co Fermanagh, was hit in the head.
Detectives believe the same gunman may have been involved in all three killings, firing one shot before disappearing, and then leaving other terrorists to dismantle the rifle.
A senior security source last night said recovering the gun was now an even greater priority: 'It's probably the most worrying threat of all at the minute and we have to find it. Body armour is absolutely no protection . . .'Reuse content