The incident took place when the police tried to nab history-sheeter Kattekola Sudheer (25) following which he opened fire at them near the municipality office in Godavarikhani town, about 75 km from here.
In retaliation, police also fired at him and he was killed, Godavarikhani Deputy Superintendent of Police G Udaykumar Reddy said, a country-made revolver was seized from his possession.
Sudheer was wanted in three murder cases, a kidnapping incident and two cases of extortion, Reddy said.
His accomplices in several cases, Neelapu Vamshi (22) and Dasari Prem Kumar (23), were arrested yesterday after the police got to know that they were hatching a conspiracy to attack the investigation police team in Karimnagar, Reddy added.