The man shot by police in St Neots in Cambridgeshire last night has been named locally as 41-year-old Richard Davies.
He is believed to have lived in Duck Lane with wife Samantha Davies, 35, and their three children.
Neighbours said shots were fired from outside the house before armed officers then stormed inside.
Mr Davies had worked as an hydraulic repair fitter for firm Bosch Rexroth.
A friend, who did not want to be named, said Mr Davies had been off work before the incident.
Speaking at the scene, she said: “Can’t believe it, I’ve lost another friend.
“He got shot last night Richard Davies. Police shot him.
“It’s sad isn’t it, it’s absolutely heartbreaking.
“It was him, he’s been off work. “
A nearby neighbour watched the drama unfold from his upstairs back window after his dogs alerted him to the commotion.
Gordon Woodend, 62, said: “There was a lot of commotion going on and there were lights flashing.
“So I went out and got the dogs and I heard two shots.
“I got the dogs in and went upstairs and looked out my back window and then I saw police going in with machine guns into the house. I think there were about six of them.
“There were shots from outside before the police went in and then police were shouting really loud before they broke the door down to get in.
“I never heard any shots inside the house.”
The retired fabricator welder added: “It took police about five minutes to break the door down I think.
“The paramedics were in there for ages.”
Another nearby neighbour, pensioner Mary Bath, 65, said: “It’s frightening.
“We just heard the bangs when we were watching TV and when my husband went out the police officer told him to come back inside for his own safety.
“It was a bit scary, you just don’t expect it on your doorstep.
“It scared the dog as well because she went berserk when she heard the bangs.”
Mrs Bath, who has lived at her property since 1988, she added: “I’ve seen the couple about, I just wave and say good morning to them.
“We didn’t hear any arguments, but we knew it wasn’t just a domestic when the police bashed the door in.”
Rob Hudd, who lives adjacent to the house where the man died, said: “I heard this loud bang and looked out the back, but I couldn’t see any fire works. I looked out again and all I could see was blue lights and there were police everywhere.
“I had seen the man around, but I don’t think I have ever spoken to him.
“It [the bang] sounded really close. It sounded like it was right outside in my garden.”
A woman who lives nearby said she knew the couple who lived at the house and believed they had three children.
She said: “It is shocking. Her children used to play with our family. We thought it was fireworks going off when we heard it.”
Neighbour, Anne Barrett, said: “I heard a noise. I didn’t know what it was. I had the TV turned up and I heard this noise. It was like the sound of a fire work.”
One man, who lives nearby, said: “I did not see anything, but I heard two loud bangs last night.”
Another neighbour said: “I don’t know what has happened. It is a big surprise.”
One woman, who asked not to be named, said: “I was in the shower and I heard this loud bang. I saw these flashing lights. It is quite scary that this has happened around here.”
An IPCC spokesman would not say if there was anyone else in the house at the time of the incident.