Officers responded to reports of a man armed with multiple weapons on The Strand in Townsville's North Ward just before 10am on Saturday.
Police say he was shot in the chest and despite immediate medical attention was declared deceased at the scene.
He is yet to be formally identified.
A crime scene has been established near the intersection at Mitchell and McKinley streets and an investigation by the force's Ethical Standards Command is under way.
Queensland's Crime and Corruption Commission will oversee the inquiry.
No police officers or members of the public were physically injured during the incident.
Superintendent Chris Lawson said officers involved in the shooting were already receiving support after the "highly traumatic" incident.
"We will continue to provide assistance to our police that have been here today and we will make sure that this event is investigated to the full extent of what the coroner requires," Mr Lawson said on Saturday.
"These events today will undergo a significant amount of investigation."
Body-worn cameras worn by the officers involved will also be examined during the investigation, he said.
Saturday's incident is the third police shooting in Townsville in the past year.
Supt Lawson said police were trained to handle dangerous incidents.
"Some of these instances require the use of lethal force to make them come to an end," he said.
"It is a continuing and ongoing effort of this district to ensure that they people that work for us here in Townsville are supported."
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