He was one of Latin America's most famous performers, and his killing has prompted a wave of reaction. Guatemala's leader said early investigations suggested Cabral was not targeted but the attack was aimed at a music promoter travelling with him.
President Alvaro Colom said he was "dismayed by this cowardly act" and decreed three days of mourning. Cabral had performed in the city of Quetzaltenango, 200km (120 miles) west of Guatemala City, on Thursday. He was heading to Nicaragua for more concerts.
Police said Cabral's vehicle, which was accompanied by another carrying bodyguards, had been hit by a number of rifle bullets and the singer died at the scene.
His most famous song was No Soy de Aqui ni Alla (I'm Not From Here or There), which was recorded in a number of languages.
Argentine Foreign Minister Hector Timerman tweeted his "profound sadness" at the news, adding: "Adios amigo!"
Meanwhile President Colom told Argentine radio he had called his counterpart, President Cristina Fernandez, to tell her the news and said that it "seemed to hit her hard".
"We will find these criminals and bring them to justice," he said.
The president's office said police were investigating whether the shooting was an attempted robbery or a targeted attack.
The presidents of Colombia, Ecuador and Venezuela were among those sending condolences.
"What pain! We cry with Argentina and all of our great fatherland," tweeted President Hugo Chavez of Venezuela.
Guatemalan Nobel Peace Prize winner, Rigoberta Menchu, travelled to the scene of the killing and openly wept.
"For me, Facundo Cabral is a master," she said. "He loved Guatemala greatly."
Local media said the vehicle carrying Cabral tried to escape into a fire station. Police said one of the attackers' vehicles was later found abandoned on the road to El Salvador. It had bullet holes and contained spent cartridges.
Cabral's representative, David Llanos, told reporters: "I don't know how and why this happened, because Facundo is well-known around the world and I don't see why anyone would be interested in killing him."
Guatemalan fan Edgar Palacios, 54, told Reuters the singer would not be forgotten.
"Facundo Cabral died but his music will never die, just like John Lennon died but his music never died. Cabral wasn't just from one country. He was a universal man."
Cabral became famous in the early 1970s as a protest singer in Argentina.
His wife and baby daughter died in a plane crash in 1978.
In 1996, Unesco declared him a "world messenger of peace".
In an interview with Associated Press in 2008, he said: "I love life so much because it cost me so much to enjoy it. From the cradle to the grave is a school, so if what we call problems are lessons, we see life differently."
Guatemala has one of the highest murder rates in Latin America.