The Sri Lankan government has described the assassination of its foreign minister as a "grave setback" to the country's peace process.
Soldiers are carrying out house-to-house searches
It has also rejected the Tamil Tiger rebel group's denial of being involved in the killing.
Lakshman Kadirgamar, a Tamil and fierce critic of the Tigers, was shot dead in a gun attack in Colombo on Friday.
President Chandrika Kumaratunga has declared a state of emergency and appealed for calm.
A spokesman for the government said the killing seriously undermined efforts to revive the peace process stalled since April 2003.
"The Liberation Tigers of Tamil Eelam has denied any involvement but we find it extremely difficult to accept the denial," reports quote the government spokesman, Nimal Siripala de Silva, as saying.
Earlier, the head of the rebels' political wing insisted that the group had nothing to do with the killing.
"We strongly condemn this attempt to put the blame on us and we strongly deny any involvement in this assassination," SP Tamilselvan told the BBC's Tamil Service.
The Tigers and government agreed a ceasefire in February 2002, although it has been under increasing strain in recent weeks.
Mr Kadirgamar, 73, was shot at his heavily-guarded home on Friday evening.
Police believe one or two snipers carried out the attack, hitting the veteran minister several times in the head and chest. He died in hospital despite emergency surgery.
The funeral will be held on Monday.
The president said Mr Kadirgamar had been killed by "political foes" but stopped short of accusing the Tamil Tigers.
"A state of national emergency has been declared to facilitate enhanced security measures and effective investigations of this wanton act of terror," her office said in a statement.
Under the emergency powers the authorities can:
- deploy troops freely
- detain without charge anyone suspected of terrorist activities
- search and demolish buildings.
Dozens of military trucks are said to have moved into Colombo and soldiers have set up roadblocks in the city.
All vehicles coming in and out of the city are being checked and navy patrol boats have been deployed to guard the coastline.
Soldiers and police are conducting house-to-house searches.
Police sources said two men had been arrested but gave no further details.
Feb 2002: Government and Tigers sign ceasefire paving way for talks
Dec 2002: Both sides agree to share power with autonomy for Tamils in north and east
Apr 2003: Tigers suspend talks claiming marginalisation
Mar 2004: Renegade Tiger leader splits group in east
Jul 2004: Suicide blast in Colombo - first since 2001
Dec 2004: Tamil areas badly hit as tsunami strikes
Jun 2005: Aid deal reached with Tigers amid protests
The BBC's Dumeetha Luthra in Colombo says Mr Kadirgamar has often said he was on top of the Tigers' hit list.
He travelled with a huge entourage of security forces and was the most closely guarded minister in the government.
A lawyer by training, Mr Kadirgamar was seen as a tough opponent of the Tamil Tigers. He played a key role in getting the group listed as a banned militant organisation in the US and the UK.
He was appointed foreign minister in April 2004, but had previously held the position from 1994 to 2001.
Neighbouring India condemned what the foreign ministry described as a "terrorist crime" and offered its full support. US Secretary of State Condoleezza Rice, who last met Mr Kadirgamar in June, said those responsible must be brought to justice.
She praised Mr Kadirgamar as a man of "dignity, honour and integrity, who devoted his life to bringing peace to Sri Lanka".
UN Secretary General Kofi Annan said in a statement quoted by the AFP news agency: "Sri Lanka has lost a deeply respected statesman dedicated to peace and national unity."