Ukrainian Prime Minister Volodymyr Groysman implied Russia had orchestrated the killing. Babchenko was a vocal critic of the Kremlin and left Russia in 2017, saying he no longer felt safe there.
"I'm sure that the Russian totalitarian machine did not forgive him his honesty and his fidelity to principle," Groysman said in a Facebook post.
"Best friend of Ukraine, who told the truth about Russian aggression to the world. The murderers must be punished!"
Ukrainian state news agency Ukrinform said Babchenko, 41, was shot in the back and died in an ambulance, citing his friend and supervisor, Ayder Muzhdabaev, deputy general manager of Ukrainian TV channel ATR.
Kremlin spokesman Dmitry Peskov slammed Ukraine on Wednesday as an unsafe place for journalists to work.
"We know that many people are dying, many journalists are dying, journalists are thrown into prison for doing journalist work. We consider this unacceptable, we believe that this should be the topic for a very tough international reaction that will encourage the Ukrainian authorities to take effective measures to rectify the situation," he said.
When asked for his response to Ukraine's accusations that Russia was behind the killing, Peskov dismissed the idea as anti-Russian.
"This is the highest level of cynicism amid such a brutal murder, to shake the air in such a Russophobic way, instead of talking about conducting a thorough and impartial investigation."
But ATR's Muzhdabaev pointed out that Babchenko did not report on Ukrainian affairs and said his journalism was solely focused on Russian affairs.
"He did not do anything else. He did not conduct any investigations, did not write anything about Ukrainian affairs, exclusively journalism about the Russian government, about their actions, about their criminal activities, that's all," he said.
Russian-Ukrainian relations were plunged into crisis in 2014, when Russia annexed the Crimean Peninsula and as pro-Russian rebels seized parts of the east of Ukraine.
British Foreign Secretary Boris Johnson said he was "appalled" by the killing of Babchenko.
"We must defend freedom of speech and it is vital that those responsible are now held to account," he wrote on Twitter.
The UK has blamed Russia for the poisoning of a Russian ex-spy, Sergei Skripal,
and his daughter, Yulia Skripal, on British soil, but Moscow denies the accusation. The incident sparked a diplomatic crisis between the two countries.
Ukrainian police are now searching for the man they believe to be responsible for Babchenko's death.
The Interior Ministry released a sketch of a bearded man wearing a baseball cap, and described him as being in his early 40s, between 175 and 180 centimeters tall, of average build and with gray in his beard.
Babchenko left Russia after he criticized the Kremlin in a Facebook post in 2017.
He faced backlash after commenting on the crash of a Russian plane transporting the world-famous military choir Alexandrov Ensemble en route to Syria. They were traveling to perform for pilots involved in Russia's air campaign on Aleppo.
Babchenko called Russia an aggressor, and accused the country of killing children in its air support of Syrian President Bashar al-Assad's regime..