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Authorities responded to a welfare check at a residence on Wells Street in Springfield, near Gosford, shortly before 3:30 PM yesterday.
Upon arrival, they encountered a 49-year-old man who had armed himself with a screwdriver and various sharp tools, prompting officers to set up a perimeter around the home.
Despite efforts to communicate, the man reportedly remained uncooperative with police negotiators.
The situation escalated around 9:25 PM when the man attempted to use an aerosol can as a makeshift flamethrower against an officer.
Tactical units then moved in, only for the man to brandish a sharp object and make several stabbing motions towards an officer.
In response, police fatally shot the man, while one officer sustained a minor injury during the confrontation.
The man was treated by paramedics but died at the scene.
A critical incident team is now investigating the incident.