Gunmen today shot dead a US aid worker and his driver in the city of Peshawar, the capital of Pakistan's troubled North-West Frontier Province.

The attack took place in the University Town area of the city, which is popular with foreign workers. It came a day after a suicide bomber killed at least three people outside a sports stadium in Peshawar, escalating fears that Pakistan's new government is losing control over a resurgent Islamist militant threat within its borders.

A spokesman at the US embassy in Islamabad said: "An American citizen and his Pakistani driver were killed in an attack in Peshawar. The attack is currently under investigation and we are coordinating with the local authorities."

Pakistani police told a local television news channel that the authorities believed they have "close camera shots of the assailants" and had launched a search for the gunmen.

The latest attack will escalate fears that Pakistan is losing grip as it battles to fight Islamic extremists on its territory. Concerns have been voiced in recent months that Peshawar, long cherished as an intellectual and artistic hub, could fall to the Taliban as Pakistan's emboldened militant factions make a move into Pakistan's urban areas.

The American and his driver who were killed today were travelling in a car belonging to an organisation involved in a US-funded development programme in Pakistan's unsettled tribal areas bordering Afghanistan.

A security official in Peshawar identified the man as an official with the US-funded FDP, the federally-administrated tribal areas' development programme.

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