ISLAMABAD, Pakistan -- An American aid worker overseeing a high-profile U.S. development program for Pakistan's tribal area was gunned down Wednesday in the northwest city of Peshawar in what's thought to be the first targeted killing of a Westerner in the current campaign of violence by Islamic extremists.

Stephen Vance, a contractor to the government development agency, the U.S. Agency for International Development, was shot dead along with his Pakistani driver on his way from his home to his office. He was living in Peshawar with his wife and five children.

An armored car saved Lynne Tracy, a U.S. diplomat whose vehicle was attacked in Peshawar in August, but Vance didn't have one.

Islamic militants are thought to have attacked Tracy and Vance.

The assassination came as a wave of bombings, kidnappings and hijackings continued to grip Pakistan's volatile northwest. The violence has spread across the country since summer last year, when Islamists began an insurrection after government security forces stormed a radical mosque in the capital, Islamabad.

Police found seven spent shells at the site of Vance's killing, investigating police Officer Abdul Qadir said. He said police had sent the bodies for autopsies.

The ambush occurred close to Vance's office and the city's American Club, in a narrow street in an upscale residential part of the city known as University Town. U.S. diplomats and USAID staff aren't allowed to have their families in Pakistan for security reasons. However, as a contractor to USAID, Vance lived a less well-protected life.

Vance worked on a flagship $150 million U.S. aid program for the militancy-plagued tribal area -- which runs alongside the Afghan border -- setting up small and midsize projects to improve the infrastructure.

His ''livelihoods'' project sought to create job opportunities for people in the tribal belt, especially in Waziristan, a dirt-poor region where many have joined the Taliban and other extremist groups simply for the money.

A former colleague, Homira Nassery, told McClatchy: ``This hurts bad. Stephen Vance was one of the best bosses I've ever had and deeply committed to delivering services to the poorest of the poor. And these are the thugs we're going to negotiate with?''

Law and order has deteriorated sharply in Peshawar, the capital of the North West Frontier Province, with kidnappings of locals for ransom on the rise.

The city is on the edge of the lawless tribal area, making it vulnerable. The Afghan ambassador-designate to Pakistan was abducted in Peshawar earlier this year, and kidnappers are holding a Polish engineer and several Chinese workers in the northwest.

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