A man has died after being shot by police during an exchange of gunfire in the tiny Victorian town of Daisy Hill in the Central Goldfields.

Police were called to Menzies Drive to investigate a report that a man had fired a gun just before 3pm on Thursday.

The officers said they attempted to engage with the man, who remained armed, before he staged a siege that lasted several hours.

Specialist units including Critical Incident Response Team, Special Operations Group, and Dog Squad were called in.

Police said about 10pm, the man fired shots towards police who returned fire, striking the man.

Several police cars are parked on the grass beside a fence on a country road at night.

Police were called to reports the man had discharged a firearm at the Daisy Hill property. (ABC News)

The yet-to-be-formally identified gunman died at the scene.

No-one else was physically injured during the incident.

Homicide Squad detectives will now investigate along with Professional Standards Command, in accordance with standard procedure for a fatal police shooting.