Officers were called to Ernest Street in the Ipswich suburb of One Mile at 11.15am after reports of a 27-year-old man roaming around with a weapon.
Police tried to negotiate with the man, but say he threatened officers who then shot him around 12.30pm.
He was treated at the scene but died.
An emergency declaration was made to keep residents on Ernest Street and Woodford Street indoors.
The order has since been revoked.
Ernest Street and Woodford Street have been declared a crime scene, police said.
This shooting is under investigation by the Ethical Standards Command.