Prime Minister Xanana Gusmao, escaped an attack on his motorcade unhurt.
East Timor, a nation of 1 million people, is a former Portugese colony that borders Indonesia and is off the northern coast of Australia. It gained independence in 2002 after years of Indonesian occupation.
Army spokesman Maj. Domingos da Camara said rebel leader Alfredo Reinado and one of his men were killed in the attack on the home of Ramos-Horta, while one of the president's guards also died.
"I consider this incident a coup attempt against the state by Reinado and it failed," Gusmao said. He called it a well-planned operation intended to "paralyze the government and create instability."
"This government won't fall because of this," he said.
The attacks plunged the tiny country into fresh uncertainty after the firing of 600 mutinous soldiers in 2006 triggered unrest that killed 37 people, displaced more than 150,000 others and led to the collapse of the government.
Reinado was one of several army commanders who joined the mutiny. While most have returned home, Reinado and an unknown number of armed supporters had remained in hiding, refusing pleas to surrender.
Australia announced it would send scores more soldiers to the international peacekeeping force it currently heads in the country, bringing total troop levels to around 1,000. The neighboring nation also pledged more police officers to the 1,400 strong U.N.-led force already there.
"Someone out there tried to assassinate the political leadership of our friend, partner and neighbor," Australian Prime Minister Kevin Rudd said. "They have asked for some help, and we are about to provide it."
Ramos-Horta underwent surgery at an Australian army hospital in East Timor before being flown to the northern Australian city of Darwin for further treatment, said Ian Badham, a spokesman for medical evacuation service CareFlight International.
The manager of the Royal Darwin Hospital said Ramos-Horta had been transfused with 16 units of fresh blood, but doctors were "hopeful of a very good recovery."
"The abdominal injury is very straightforward, I understand, but there is some concern about his chest injuries," said Dr. Len Notaras. "His vital signs are all very stable and I understand, before he was sedated, he was speaking in a very clear frame of mind."
Earlier, Gusmao urged the country to stay calm.
"I also appeal to the people not to spread any false rumors and information," he said.
Two cars carrying rebel soldiers passed Ramos-Horta's house on the outskirts of the capital, Dili, at around 7 a.m. and began shooting, da Camara said. The guards returned fire, he said. Reinado, former head of the military police, took part in the attack and was killed.
Reinado was to go on trial in absentia for his alleged role in several deadly shootings between police and military units during the violence in 2006. He was briefly arrested but broke out of jail later the same year and had since evaded capture.
Despite the outstanding charges, Ramos-Horta had met with Reinado on several occasions in recent months to try to persuade him to surrender.
The attack on Gusmao's car was led by another rebel commander, Gustao Salsinha, said one of Gusmao's bodyguards, who spoke on condition of anonymity because he was not authorized to speak to the media.
Australian-led troops restored calm following the 2006 turmoil and Ramos-Horta was elected president in peaceful elections held in May 2007. Low-level violence has continued in the country since then.
Deposed Prime Minister Mari Alkatiri has maintained that Ramos-Horta's government is illegitimate. His political party immediately condemned Monday's attacks in a statement released to the media.
East Timor gained independence after voting to break free from more than two decades of brutal Indonesian occupation in a U.N.-sponsored ballot.
Gusmao, who led the armed struggle against the occupation, has vowed along with Ramos-Horta to tackle rampant poverty and restore damaged relations between the country's police and army.
The Brussels-based International Crisis Group warned last month that East Timor risked lapsing back into unrest if lingering resentment following the 2006 violence was not addressed by the government and the United Nations.
Analysts predicted Reinado's supporters may riot in the coming days, but said his death had removed one of the major obstacles to peace in the country. The streets of Dili were calm Monday, witnesses said.
"I've always thought that Major Reinado was a pretty dangerous person, very unstable, (but he) has only had a small amount of support in East Timor," Former Australian Foreign Minister Alexander Downer told the Australian Broadcasting Corp. "Not to wish anyone their death, but the fact he is off the scene altogether will be a good thing for the stability of East Timor."
Ramos-Horta shared the 1996 Nobel Peace Prize with countryman Bishop Carlos Belo for leading a nonviolent struggle against the Indonesian occupation.
