The 48-year-old man, who was believed to have been carrying a sawn-off shotgun, died at the scene after he was shot by a senior constable at the Park Orchards store about 9pm on Sunday.
Two other men, aged 49 and 50, were arrested shortly after the incident and are being interviewed.
Police were in the area investigating a series of armed hold-ups when they happened across the attempted robbery.
It's believed the man was pointing his weapon at the bottle shop attendant, prompting police to open fire.
"One of the investigators involved took immediate action because he was very concerned about the firearm threat to the single attendant that was working in the bottle shop," Victoria Police Deputy Commissioner Ross Guenther told reporters.
The officer involved, a senior constable from a specialist unit, was not injured and is receiving support, police said in a statement.
A witness, who uploaded photographs of the scene to Twitter, said he heard five or six shots.
"Someone is not going home tonight," Michael Featherston tweeted.
The incident is before the coroner.
