A lone gunman armed with a handgun fired ten shots at police in Creggan, striking the 29-year-old journalist standing beside a PSNI landrover.
She later died Altnagelvin Hospital.
President Michael D Higgins said Ms McKee was a “woman of talent and commitment who was shot exercising her profession”.
He said that “people will be shocked and outraged on hearing of her death” and he and his wife Sabina “send our deepest sympathies to her family and friends and to all those who knew her and worked with her”.
Taoiseach Leo Varadkar has expressed his condolences to Ms McKee’s family and her partner Sara and her friends.
In a tweet, he said: “The Government condemns in the strongest possible terms the fatal shooting of journalist and writer Lyra McKee in Derry.
“We are all full of sadness after last night’s events.
“We cannot allow those who want to propagate violence, fear and hate to drag us back to the past.
“Our solidarity also goes out to the people of Derry and to the entire journalism community.”
Tanaiste Simon Coveney TD and Minister for Foreign Affairs Simon Coveney tweeted: “Sick to my stomach at death of Lyra McKee in Derry. S
“She was an inspiring thinker and journalist.
“Last night she was killed by a thug terrorizing people in Derry. Anyone with information should contact PSNI.”
He added in a statement that there was no justification for this tragic loss of live and “I call on those intent on violence and disturbances to stop.”
“As we mark the 21st anniversary of the Good Friday Agreement, we are reminded that the vast majority of people of this island voted overwhelmingly for peace and reconciliation and an end to violence.
“There can be no going back to those awful days.”
British Prime Minister Theresa May said the killing of Ms McKee is “shocking and truly senseless”.
She added: “She was a journalist who died doing her job with great courage.”