UPDATE - 2.30pm

Four Baw Baw police officers involved in a shooting at Drouin this morning are “extremely shaken,” according to Victoria Police assistant commissioner Glenn Weir.

A sergeant and three senior constables were at the scene when a man known to police was shot.

“They have taken immediate action after a really serious criminal offence.  They have taken action as per their training to try and apprehend an offender for a series of violent offences,” he said.

A/C Weir said the drama began at Mirboo North at about 7.30am when a man, armed with a knife, took a car by force.

He said the Latrobe Valley man was known to police and aged in his early 30s.

The man was intercepted after crashing into a guard rail in Princes Way, Drouin.

A/C Weir said the man exited the vehicle, armed with a knife and refused to put down the weapon on police demands.

The man approached police and a male officer fired two shots.  Paramedics attended but the man died at the scene.

1.30pm:

A man has died after being shot by police in Drouin this morning.

The shooting occurred when police responded to reports of a vehicle driving erratically in the Drouin area just before 9am.

It is believed the silver Audi was stolen during an armed carjacking at 7.40am in Mirboo North.

A Drouin man, who was out walking at the time, saw the drama unfold.

Mick Henry said police cars and sirens caught his attention as he watched the scene unfold about 200 metres away in Princes Way.

Mick said he saw a silver vehicle collide into other vehicles as it drove erratically in an easterly direction.

He said a man jumped from the vehicle, there was shouting and he saw the man ran towards police and appeared to be carrying something.

Mick said one police officer was running from the man when a second police officer fired his gun. “I heard two shots and he fell to the ground.”

Police are calling for anyone who witnessed the incident to contact Crime Stoppers on 1800 333 000 or submit a confidential report online at https://bit.ly/2Ma6QF3