The Serbian Government has declared that a Belgrade-based criminal gang was behind the assassination of the pro-reformist Prime Minister, Zoran Djindjic.
Djindjic played a leading role in ousting Milosevic
The authorities want to question 20 people in connection with Wednesday's killing, including a former commander of a special police unit, Milorad Lukovic, said to be one of the group's leaders.
Mr Djindjic was shot in the stomach and in the back outside government offices in Belgrade at about 1300 local time (1200 GMT), and died of his wounds in hospital.
Acting Serbian President Natasa Micic has declared a state of emergency under which some civil rights can be curtailed and the army takes over police duties.
"The assassination on Serbian Prime Minister Zoran Djindjic was an attempt by this group to halt the fight against organised crime," a government statement said.
Correspondents say the assassination of the prime minister heralds the start of turbulent days for Serbia, leaving the country with a potentially dangerous political power vacuum.
Police carrying machineguns sealed off the area, searching cars and checking passengers. All bus, rail and air traffic in and out of Belgrade has also been halted.
The Serbian cabinet, which observed a minute's silence when it met for crisis talks after the attack, has declared three days' mourning.
Mrs Micic told Serbian Radio that she had declared the state of emergency "with the aim of safeguarding the security of people and property, and engaging in a determined showdown... with organised crime".
She urged people to remain calm, but said the state of emergency would remain in place until the killers were brought to justice.
'Bad day for the Balkans'
Vojislav Kostunica, former Yugoslav President and a longstanding rival of Mr Djindjic, said he was appalled by the attack.
"The fact that political violence is happening... is a terrible warning about how little headway we have made on the path of real democratisation of our society," he said just before Mr Djindjic's death was confirmed.
Europe has lost a friend... who fought hard for democracy
The European Union expressed shock and dismay at the assassination, with Greek Foreign Minister George Papandreou, whose country holds the EU presidency, sending condolences to Mr Djindjic's family "and to (the) entire Serb people".
"Europe has lost a friend... who fought hard for democracy," an EU statement said.
Dame Pauline Neville-Jones, a former adviser to the EU High Representative to Bosnia, Carl Bildt, paid tribute to Mr Djindjic.
"This is a really bad day for the Balkans, and it's a really bad day for Serbia," she said.
"Here was a man who more than any other single figure stood for the reform process, and... it now throws all the cards in the air."
On 21 February, Mr Djindjic survived what he said was an assassination bid when a lorry swung into the path of his motorcade as he was travelling to Belgrade airport.
He later dismissed the incident as a "futile effort" which could not stop democratic reforms.
Correspondents say that Mr Djindjic, 50, made many enemies over his career as a pro-democracy campaigner and then as Serbia's prime minister.
He was pivotal in arresting and handing former President Slobodan Milosevic over to the war crimes tribunal in The Hague in June 2001.
The move opened the way to international aid to the then Yugoslavia.
Zoran Djindjic was born in Bosanski Samac, Bosnia, the son of a Yugoslav People's Army officer.
CATALOGUE OF VIOLENCE
March 2003: Serbian premier Zoran Djindjic shot dead
Feb 2003: Djindjic says attempt made on his life
June 2000: Serb opposition leader Vuk Draskovic survives shooting
May 2000: Goran Zugic, national security adviser to pro-West Montenegrin president, shot dead
October 1999: Draskovic survives road accident "assassination attempt"
He graduated from Belgrade University's philosophy faculty, but was jailed by Yugoslavia's Communist leader Josip Broz Tito in 1974 for trying to organise an independent students' group.
After his release, he went to West Germany and earned a PhD in philosophy.
Spurning the Communists, he returned to Belgrade in 1989 and co-founded the Democratic Party, joining other reformists to campaign against the authoritarian rule of Mr Milosevic.
After fleeing to Serbia's sister republic Montenegro during the Nato air strikes on Yugoslavia in 1999, Mr Djindjic returned to Belgrade to form the DOS movement with 17 other parties.
Their new street crusade for democracy culminated in the overthrow of Mr Milosevic after he refused to accept election defeat.