Rick Maddison had been holed up in a "shed-type structure" on a property near Gatton overnight and at 11am on Tuesday morning ran into nearby bushland, police said.

The 40-year-old was shot dead at the scene.

No police officers were injured during the arrest.

EARLIER

Lockyer Valley residents remain on edge with some unable to return to their homes after a gunman suspected of shooting dead a police officer sparked a siege that has continued well into Tuesday morning.

Ricky Charles Maddison, 40, was holed up in a "shed-type structure" on a property near Gatton after a police chase on Monday afternoon sparked by the shooting death of Senior Constable Brett Forte.

The Toowoomba tactical crime squad member died after he tried to intercept the gunman at a traffic stop in Lockyer Valley just before 2pm.

It is understood the "wanted man" got out of his car and shot down Senior Constable Forte before he drove off down a dirt road at Seventeen Mile, north-west of Gatton.

A police car rolled during the chase.

'This guy has got serious history'

Armed with a semi-automatic weapon, the man reportedly fired at a police helicopter as he entered a property late Monday afternoon.

An emergency situation was declared and residents were told to remain inside their homes within the lockdown area while others were cordoned off from their homes.

"This guy they are after, he has got serious history," Queensland Police Union CEO Ian Leavers said on Tuesday morning, without going into details.

"I know a bit about him but while it is unfolding I have to hold back."

He has been described in media reports as a career criminal, which included a 2008 arrest in Gatton for torture, deprivation of liberty, and drug offences.

'It was frightening'

Mr Leavers indicated Mr Maddison should not have been at large.

"I would like to say more but I just don't want to hamper anything more because obviously there could be prosecution down the track and I want justice to happen very quickly."

It is understood Mr Maddison has a criminal history spanning more than two decades.

Cold and sometimes frustrated residents waiting at the edge of the police cordon have detailed what they know of the terrifying scenes.

'It was frightening'

Kylie Shepherd heard what sounded like machine gun fire start while she was hanging out the washing and made the split-second decision to flee.

"I knew something bad was going to happen," she said.

"It was frightening.

"I thought they (the police) were all gone."

Exclusion zone

Mrs Shepherd called her family as she left the property, close to where Maddison remained holed up in a tense standoff with police on Tuesday morning.

"She was like 'don't come home, shit's going down'," daughter Kristen, 27, said.

Locked out of their Wallers Road home thanks to the massive exclusion area, they spent an uncomfortable night in their station wagon with 14-year-old Tyler.

Others were growing increasingly frustrated as they waited to be let back in while loved ones remained at home, within a kilometre of where Mr Maddison is believed to be holed up.

Terry Hayden said his wife, Lisa, watched as officers frantically worked to revive Senior Constable Forte at the front of his home.

"The only thing I know about him is numerous sources described him as an absolute psycho," Mr Hayden said.

Neighbours heard gunfire

Some neighbours said they believed the gunman had been living at the property with his brother, describing both a shipping container and something like a shed or shanty.

Many said they had heard machine gun fire from the property several times in the past months.

Peter Hills said he heard gunfire as often as two or three times a week and police were called to the property several weeks ago after Maddison went "ballistic" one night.

Special Emergency Response Team officers were on scene Tuesday morning as negotiations with the armed man, more than 17 hours after Senior Constable Forte was killed.

Wayne Lyons, who lives on Wallers Road, said he saw four police cars chasing a four-wheel-drive in the early afternoon before the vehicles disappeared into a wooded area.

This was followed by what Mr Lyons described as gunfire that "sounded like a machinegun" and what he thought sounded like pistol shots in return.

He said in the hour since the opening exchanges of gunfire, he had heard occasional shots until just before 4pm.

He said helicopters had been circling overhead and police cars had been tearing past his home and he estimated the gunfire to be three to four kilometres from his home.

Paramedics remain on scene.

-with Toby Crockford, Rachel Clun & AAP