Aboud Rogo Mohammed was on US and UN sanction lists for allegedly supporting Somalia's al-Shabab militants.
According to a UN report, he had helped al-Shabab obtain funding and new recruits. He was also facing charges of plotting attacks in Mombasa.
Reports said he was gunned down while driving a vehicle in the Bamburi area of the city.
"He has been shot dead, he was in a vehicle with his family including wife and children when they were attacked," a police source told AFP news agency
Aboud Rogo Mohammed was placed on a US sanctions list in July for "engaging in acts that directly or indirectly threaten the peace, security or stability of Somalia".
The UN Security Council imposed a travel ban and asset freeze on him in July, saying he had provided "financial, material, logistical or technical support to al-Shabab".
It accused him of being the "main ideological leader" of Kenya's al-Hijra group, also known as the Muslim Youth Center, which is viewed as a close ally of al-Shabab.
He had "used the extremist group as a pathway for radicalisation and recruitment of principally Swahili-speaking Africans for carrying out violent militant activity in Somalia," the UN added.
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