Officers were called to Ernest Street in the One Mile suburb of Ipswich at 11:15 am after reports of a 27-year-old man roaming around with a gun.
Police tried to negotiate with the man, but said he threatened officers who shot him around 12:30 p.m.
He was treated at the scene, but died.
An emergency statement has been issued to keep the residents of Ernest Street and Woodford Street inside.
The order has since been withdrawn.
Ernest Street and Woodford Street have been declared crime scenes, police said.
This shooting is under investigation by the Ethical Standards Command.