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The order has now been revoked.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