The incident happened near Gulshan-2 intersection around 8:40pm Tuesday hours after the health minister's programme at a public hospital was bombed.
Rahman was on his way home after meeting the 'besieged' BNP chief at her office.
The former state minister for foreign affairs, hit by four bullets in the waist and leg, was admitted at United Hospital.
Doctors said he was 'out of danger', but kept him under 'close observation'.
Protesting against the attack on Rahman, the BNP has already hit Bangladesh with a dawn-to-dusk nationwide general strike for Thursday amid the blockade.
Khaleda, condemning the attack on her adviser, alleged that it took place following instigation from the government high-up.
Then they poured petrol on it and lighted it before fleeing.
Former foreign secretary Rahman went to meet the BNP chief at 8pm. He left her office around 8:30pm, and had come under attack only minutes later.
Police towed the burnt car sometime later and cordoned off the scene while RAB and BGB intensified patrols in the area.
Gulshan Police Station OC Rafiqul Islam told bdnews24.com that he was near the scene when the events occurred.
"I rushed there after I heard shots and saw the car on fire. Then I found Reaz Rahman with bullet injuries. He was rushed to United Hospital in a police vehicle."
The OC said Rahman told him at the hospital that he saw three attackers. They shot him right after he got out of the car.
Rahman's son-in-law Arselan Quddus told bdnews24.com that the driver had called him first when the car came under attack and his father-in-law was shot.
"Then I enquired first about my father-in-law's condition and told him (driver) to come home," Quddus said.
Reaz Rahman is the second adviser to Khaleda Zia whose car was torched this week.
The car of Sabihuddin Ahmed, another adviser and former government secretary, was set on fire Saturday night near the Gulshan office despite police presence.
Since Jan 5, when Khaleda called the nationwide indefinite blockade across Bangladesh, over 50 vehicles have been torched in the capital alone.
Reaz Rahman, a career diplomat-turned politician, is a former Foreign Secretary, having served in that capacity in the early 1990s during Khaleda Zia’s first term as prime minister.
He joined BNP on his retirement and was initially made State Minister for Foreign Affairs as a technocrat in the 2001-06 Khaleda Zia administration. A couple of years later, Rahman was made an advisor to the PM with the same rank and ceased to hold the ministerial position.
Son of Dr Amina Rahman, an advisor when Gen Ziaur Rahman ruled Bangladesh, the former diplomat has been a key player in the party's efforts to garner external support.