At least five others were injured in the attack which took place at a teashop in the Upazila's Jamchhari Mukh on Saturday evening, according to Bandarban Sadar Police chief Shahidul Alam Chowdhury.
The murder victim was identified as Bachnu Marma, 55, president of Awami League's Rajbali Union Ward No.7 unit. The witness to the incident, Bakhoing Marma, 66, died from a 'heart attack', according to doctors.
The injured have been admitted to Bandarban Sadar Hospital.
A group of armed assailants suddenly attacked the victims while they were having a discussion at a teashop in Rajbila Union's Jamchhari area, about 10km away from the town, said Rajbila Union Parishad Chairman Kyangpru Marma, citing witnesses.
"One man died on the spot while the four Jubo League activists were wounded."
But Kyangru did not disclose the identities of the Jubo League men.
Babul Marma, a member of Rajbali Union's ward No. 7, said Bachnu died on the spot following the attack. Bakhoing, who was at the scene of the murder, suffered cardiac arrest and was taken to Bandarban Sadar Hospital along with those injured in the shooting.
Babul and Bakhoing were both dead by the time they arrived at the hospital, said its resident physician Prottush Pal Tripura. The bodies are currently being kept at the hospital's morgue.
Police are yet to identify the suspects, according to OC Shahidul.