Unidentified gunmen attacked a two-car convoy carrying Sheikh Qassem Sweidan al-Janabi and his nephew, lawmaker Zeid al-Janabi, late yesterday, officials and security sources said.
Janabi was later released but the tribal leader, seen as a moderate Sunni, as well as his son and at least six other people, mostly bodyguards, were killed.
"Gunmen manning a fake checkpoint stopped the convoy carrying MP Janabi and kidnapped all who were on board," a senior member of the lawmaker's staff said.
Sadr City is a vast Shiite neighbourhood in the north of the capital from which Iraq's powerful Shiite militias draw many of their recruits.
Adnan al-Janabi, another MP from the same tribe, said the assassinated tribal leader was a key player in efforts to combat sectarianism.
He said Sheikh Janabi, who was a particularly prominent figure in the religiously mixed areas south of Baghdad, had "a known history of confronting terrorism, sectarianism, and supporting national reconciliation."
Parliament Speaker Selim al-Juburi, also a Sunni, condemned the assassination and urged a full investigation in the circumstances of the attack.
He said the interior and defence ministers were summoned to parliament on Monday to provide explanations.
"Parliament will not remain silent in the face of acts that might undermine the authority of the state," said Janabi, at the start of a televised parliament session.
He said the assassination was evidence that some people in Iraq were "working to sabotage the achievements of the state".