Moose Wala, whose real name was Shubhdeep Singh Sidhu, was shot nearly 30 times by unknown assailants while he was driving an SUV near his home in Moosewala village in Mansa district in northern Punjab.
He was taken to hospital, where doctors declared him dead on arrival.
Images on social media showed his body in the driver's seat of a black Mahindra Thar, an Indian jeep, as attempts were made to revive him. Closed circuit television images released on Monday showed two cars had followed him.
State police said Canada-based gangster Goldy Brar claimed the responsibility for his murder.
“Moose Wala left his house in Moosa village at 4.30pm. Around 5.30pm, he was driving his jeep, accompanied by two persons, when two vehicles that had been following him intercepted his vehicle and fired at him,” said Viresh Kumar Bhawra, director general of police in Punjab.
“It seems to be an inter-gang rivalry case … [Punjabi gangster] Lawrence Bishnoi's gang is involved in this. Lucky, a member of the gang, has taken responsibility from Canada.”
Moose Wala, 28, was a pop singer who enjoyed national and global fame, with his songs reaching the UK and Canadian charts.
An electrical engineering graduate, Moose Wala began his career in 2017 after releasing his first song on YouTube. Within four years, his songs had been seen more than four billion views on the video platform.
While some modern Punjabi music contains sexist lyrics and objectification of women, Moose Wala's songs talked of village life, making him popular with many people in rural Punjab.
However, Moose Wala faced social, religious and legal challenges for glorifying gun culture and violence in his songs.
In 2020, he was arrested for firing an AK-47 rifle on a firing range, allegedly accompanied by policemen, and later released on bail.
Last December, he entered politics and joined the Indian National Congress party before the Punjab assembly elections, although he was defeated by a member of the Aam Aadmi Party, which later formed the government in the state.
Star's security halved by police
As a result of his popularity and following alleged threats to his life, Moose Wala was given police security. But on May 28, the AAP government halved his protection to two officers.
He was among the 420 people, including prominent religious figures, whose security cover was reduced to divert police resources to maintaining law and order in the run-up to the 38th anniversary of the Indian Army's raid on the Golden Temple in Amritsar, the holiest site in the Sikh religion.
The raid, known as Operation Bluestar, came at the height of an insurgency by Sikh militants whose leaders had taken shelter in the temple complex.
Moose Wala often drove a bulletproof vehicle, but on Sunday he was driving an unarmoured vehicle and had refused to take his bodyguards with him.
In 2018, Parmish Verma, another Punjabi singer, was shot but survived. A year later, Punjabi singer Karan Aujla was attacked in Canada, sustaining minor injuries. Both times, gangsters claimed responsibility.
Attacks on Punjabi singers and actors were rife during the insurgency in the 1980s.