KABUL (Reuters) - Gunmen assassinated Afghan Vice President Haji Abdul Qadir in broad daylight in the capital Kabul on Saturday, in a fresh blow to efforts by President Hamid Karzai to steer his volatile country toward peaceful elections.

Qadir, shot dead in his car in an ambush outside his office compound in the center of Kabul, was a veteran warlord who was a Pashtun like Karzai and key figure player in a nation riven by regional rivalries.

Kabul police chief Basir Salangi said two gunmen fired some 36 rounds at the car, riddling the vehicle with holes. Witnesses said that the driver was killed, two other passengers were wounded and the gunmen escaped by taxi.

"The motive for the killing isn't immediately clear," Salangi told reporters after what was the second killing of an Afghan government minister this year.

Qadir, a tall and imposing man with a trim white beard, was one of three newly appointed vice presidents and public works minister in Karzai's government.

A member of Afghanistan's biggest ethnic group, his power base was in the strategic eastern province of Nangahar, where Osama bin Laden set up his base in the early 1990s.

But he was also a rare Pashtun member of the Tajik-dominated Northern Alliance which swept into Kabul with U.S. help in November to oust their longtime foes and bin Laden's protectors, the Taliban. His assassination highlights the problems facing Karzai just weeks after a Loya Jirga or grand assembly of Afghan leaders approved a cabinet to lead the country out of 23 years of war and prepare for elections in 18 months.

President Bush, who phoned Karzai on Friday to express his condolences about the deaths of Afghan civilians in a U.S. bombing raid earlier this week, condemned Qadir's killing.

"The Afghan government is in the process of investigating who might have done this and we're more resolved than ever to bring stability to the country," he said.

Asked if terrorists were responsible, he replied: "Could be that, could be drug lords, could be long time rivals. All we know is a good man is dead and we mourn his loss."

The Loya Jirga faced the tough task of finding a government acceptable to the Pashtun majority, the Northern Alliance which has a strong presence on the ground, and the various warlords who dominate swathes of the country.

"If this government falls then you go back to civil war, the north against the south," historian Martin McCauley told Sky TV.

"The Pashtuns, who dominated the Taliban, they will then push for power in north Afghanistan and the Tajiks and the Uzbeks and the other nationalities in the north will in fact resist that and you have a recipe for disaster.

In February, Tourism Minister Dr. Abdul Rehman was killed at the airport under circumstances which have never been made clear.

GUARDS ARRESTED

Salangi said 10 guards, who had been appointed by Qadir's predecessor at the public works ministry, Abdul Khaliq Fazal, had been arrested after Saturday's assassination.

One Afghan expert said it could have been a Taliban-organized hit because of Qadir's links with the Northern Alliance. "He was one of the few Pashtuns in the Northern Alliance, so it could have been a kind of Taliban hit," he added.

Officers from the International Security Assistance Force (ISAF), in Kabul to help keep the peace, said they were investigating.

Qadir's brother, Mujahideen commander Abdul Haq, was executed by the Taliban shortly after the United States launched air strikes last year to punish the Taliban for sheltering suspected September 11 mastermind bin Laden.

Earlier on Saturday, the United States acknowledged there had been civilian casualties during Monday's bombing raid in central Afghanistan and promised a formal probe into the incident.

U.S. General Dan McNeill and Afghan Foreign Minister Abdullah Abdullah said the probe would help prevent civilian casualties in future, after a preliminary investigation into the incident failed to draw any firm conclusions.

But McNeill insisted U.S. planes had come under anti-aircraft fire and Abdullah promised the tragedy would not affect his government's or his people's support for the U.S. military campaign to root out bin Laden and his al Qaeda network.

"We have determined there were civilian casualties," McNeill said after a joint U.S.-Afghan team returned from the area. "We will initiate all formal investigations to determine what caused these civilian casualties and what we can do or implement to make sure they do not recur."

McNeill said the Afghan people had reported 48 people died and 117 people were wounded in the raid on several villages close to Deh Rawud in the rugged central province of Uruzgan in the early hours of July 1.

He added that the joint U.S.-Afghan investigating team had not been able to see the bodies, which had already been buried, or to confirm the number of deaths for themselves.

A U.S. member of the team said they had only seen five graves and 11 injured people during their visit to Uruzgan, adding that they had asked to see more graves but had been shown none.

McNeill said there were "ample indications" that Monday's air strike was launched in response to anti-aircraft fire from the ground, but admitted no anti-aircraft gun had been found.

McNeill said investigators collected shell casings and shrapnel which would be examined as part of the formal probe.

Villagers in the rugged central province of Uruzgan have said they were merely firing rifles into the air to celebrate a wedding party, in line with local traditions.

"The question is not whether to continue the operation against al Qaeda, or whether the transitional Islamic government should support or cooperate in the manner it had cooperated in the past with the coalition forces -- this is not the question," Abdullah told a joint news conference with McNeill in Kabul.

"The question is we should find out ways and means in order to prevent tragedies like losses of civilians as collateral damage in this campaign," he said.

This is not the first such incident in the U.S. campaign. Afghan witnesses say U.S. strikes have hit other civilian areas, including wedding parties, killing several hundred people.