The shooting on Mabul island marks a fresh escalation of violence in the remote area of Sabah state, one of the world's top diving hotspots, renowned for its pristine dive sites.
A massive manhunt has been launched to track down the criminals believed to have come "from a neighbouring country," Abdul Rashid Harun, head of Sabah state eastern security zone, told AFP.
One security official said on condition of anonymity that the criminals are believed to be Sulu gunmen from the Philippines.
"The group of heavily armed gunmen shot and killed a 32-year-old policeman and kidnapped another personnel member. They escaped in a boat into neighbouring waters. We have launched a security operation to track down the criminals," he said.
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Malaysia this week revamped security measures in the region after a spate of abductions in Sabah state, including the ransoming of Chinese tourists by gunmen based in the southern Philippines.
The area is notorious for human trafficking, smuggling of drugs and subsidised diesel oil from Malaysia.
Prime Minister Najib Razak, who was in Sabah yesterday, announced that a "mother ship" equipped with fast boats would be deployed near Philippines waters to fight cross-border crime.
A security zone was set up last year after Islamic guerillas of Sulu origin from the southern Philippines staged a bloody assault in the area leaving dozens dead, including security forces.
Abu Sayyaf, which is believed to be affiliated with Al-Qaeda, has been blamed for a spate of terror attacks and kidnappings, mostly in the Philippines.