The Islamic State group has claimed responsibility for the shooting on Thursday night, just days before French presidential elections, via its Amaq news agency which named the attacker as Abu Yousif, a Belgian.
President Francois Hollande said he was convinced it was a terrorist attack.
A second suspect who might have been involved in the incident on the Champs Elysees shopping boulevard may still be on the loose, authorities said.
The famous wide street that leads away from the Arc de Triomphe that had earlier been crowded with Parisians and tourists enjoying a spring evening remained closed off hours after the incident.
France has lived under a state of emergency since 2015 and has suffered a spate of Islamist militant attacks, mostly perpetrated by young men who grew up in France and Belgium, and that have killed more than 230 people in the past two years.
Interior ministry spokesman Pierre-Henry Brandet said it was too early to say what the motive of the attack was, but that it was clear the police officers had been deliberately targeted.
“A little after 9pm a vehicle stopped alongside a police car which was parked. Immediately a man got out and fired on the police vehicle, mortally wounding a police officer,” Brandet said.
Officers at the scene said they were searching for a potential second assailant, and Brandet said it could not be ruled out that there was another or others involved.
Officers also conducted a search at the home in eastern Paris of the dead attacker.
“I came out of the Sephora shop and I was walking along the pavement…. A man got out of a car and opened fire with a kalashnikov on a policeman,” witness Chelloug, a kitchen assistant, told Reuters.
“The policeman fell down. I heard six shots, I was afraid. I have a two year-old girl and I thought I was going to die… He shot straight at the police officer.”
Police authorities called on the public to avoid the area.
TV footage showed the Arc de Triomphe monument and the top half of the Champs Elysees packed with police vans, lights flashing and heavily armed police shutting the area down after what was described by one journalist as a major exchange of fire near a Marks and Spencers store.
The incident came as French voters prepared go to the polls on Sunday in the most tightly-contested presidential election in living memory.
“We shall be of the utmost vigilance, especially in relation to the election,” said President Francois Hollande, who is not himself running for re-election.
Francois Fillon, who is the conservative candidate, said he would cancel the campaign events he had been planning for Friday.
In November, 2015, Paris was rocked by near simultaneous gun-and-bomb attacks on entertainment sites, in which 130 people died and 368 were wounded. Islamic State claimed responsibility. Two of the 10 known perpetrators were Belgian citizens and three others were French.
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