The 38-year-old was arriving at his residence in Mdantsane township when two armed men wearing balaclavas got out of a vehicle and opened fire.
"I will not speculate about who did this or why," Sports Minister Gayton McKenzie said in a statement.
Tete's killing will renew attention on violent crime in South Africa, which continues to have one of the world's highest murder rates despite recent declines in homicides. The murder of the world champion has also struck a chord in Mdantsane, the Eastern Cape township that has produced some of South Africa's most successful boxers.
A 27-year-old woman travelling with Tete was shot multiple times and taken to hospital. Police have started investigations and the motive remains unclear.
Tete won the IBF junior-bantamweight world title in 2014 after defeating Japan's Teiru Kinoshita in Kobe. He later won the WBO bantamweight crown.
He is best remembered internationally for his 11-second knockout of fellow South African Siboniso Gonya in Belfast in November 2017, the fastest stoppage in a world title fight.