Libya is still plagued by widespread violence and targeted killings more than two years after the civil war ousted Muammar Gaddafi, with militants, militia gunmen and former rebels often resorting to force to impose demands on the fragile government.
The minister, Hassan al-Drowi, was shot several times, a senior security official said, asking not to be identified.
The official said: "They opened fire from another car while he was driving. He was shot multiple times.
"Later, they found explosives attached to his car. The theory is, that the bomb failed, so they shot him instead."
The official blamed Islamist militants who have been trying to extend their influence in Sirte, which has been more stable recently than the coastal capital of Tripoli, about 290 miles to the west, or the eastern city of Benghazi.Sirte was the last bastion of Gaddafi loyalists in the war, and the dictator was killed there in October 2011.
Prime Minister Ali Zeidan's central government, weakened by political in-fighting and with only nascent armed forces, is struggling to wrest control back from areas where militias are still dominant.
On Saturday, 15 people were killed in clashes between two tribes in southern Libya.
The fighting involved the al-Tabw tribe and the Awlad Soliman tribe in the city of Sabha.
A local leader said the violence was sparked by the killing of a man guarding the city's military leader, a member of the Awlad Soliman group.
Libya's General National Congress and its members have still to finish key parts of the country's transition to democracy since Gaddafi's fall, with secular parties and Islamists deadlocked over the way ahead.
The country's new constitution is still unfinished, and militias who once helped fight Gaddafi have refused to disarm, claiming the central government is too weak to provide security and stability.
In Benghazi, the armed forces have been fighting to control the influence of Ansar al-Sharia, a hardline Islamist group Washington last week designated as a terrorist organisation.
A major challenge are the armed protesters that have controlled key oil-terminal ports in the east of the country to demand more political autonomy and a greater share of the OPEC country's petroleum wealth.
Last week, authorities said the navy had opened fire to turn away a tanker that had approached to illegally load crude at one of the ports in the hands of the protesters.
The government said it was an attempt to bypass its control over crude shipments.
Protests at those three eastern ports have slashed Libya's oil shipments from 1.4 million barrels per day in the summer of last year.
But since ending protests over the western El-Sharara oilfield earlier this month, Libya's oil minister said last week total crude production climbed to around 650,000 barrels a day, with 510,000 barrels a day being exported.