It is alleged the wanted man then sprayed the two police cars with bullets using a semi-automatic machine gun, The Australian reports.
"Police are now at the scene of an incident in the Lockyer Valley this afternoon where an officer has been injured", police said in a statement.
By sunset the gunman was holed up in the farm house inside a locked-down area and in a siege situation with Special Emergency Response Team officers.
He is suspected of fatally shooting Senior Constable Brett Forte after the police officer intercepted his auto.
"At that point in time, he has fired at those police".
'We have a person contained and at my last advice we were negotiating with that person, ' Police Commissioner Ian Stewart said at a press conference on Monday night.
Senior Constable Brett Forte was killed and others received minor injuries after a "wanted man" shot at them after evading the officers when they tried to pull him over just before 2pm.
Police are continuing to search for the armed man who fled the vehicle into nearby bushland.
POLICE are still hunting for the person suspected of killing a police officer in the Lockyer Valley this afternoon.
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A police source said Maddison got out of his auto during the chase and shot Sen Const Forte before driving down a dirt road at Seventeen Mile.
"He has been challenged by police, at that time he has fired at police, specialist police have returned fire and the male person has been shot".
"I know was it was completely unexpected and Brett sadly never had a chance", Queensland Police Union chief executive Ian Leavers said.
Three officers were said to have been injured in the incident.
Shadow police minister Tim Mander joined Premier Annastacia Palaszczuk in paying tribute to Sen Const Forte, whose wife Susan is also a police officer.
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.
An exclusion zone in place for the area of Fords Rd, Forestry Rd West, Sandy Creek Rd, Gerard Lane, 17 Mile, Wallers Rd and Forest Rd.
"The police officer woke up this morning to do his job and he had people who loved him".