Senior Inspector Samsom Obatay, commander of the citys Police Special Operations Group, said the suspect, Bayan Kabalu, died from multiple gunshot wounds.
Obatay said Kabalu, known in the underworld as Alex, and his companions opened fire on the approaching policemen and the Army-led Task Force Tugis, who tried to surround their hideout in Bagua district here.
Obatay said one of Kabalus companion, Samsudin Katambak, who was implicated in recent robbery and murder cases, fled into a nearby rice field while his companions were trading shots with advancing policemen.
Another member of the Kabalu family, identified as Mustapha, voluntarily turned himself in after sensing that their hideout had been surrounded.
Katambak was arrested about a year ago but escaped from detention and has since been hiding.