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A knifeman armed with a 12-inch blade was shot dead after charging at police.
He was spotted waving the weapon around in a public square before sprinting towards officers , who opened fire.
Police descended on Freedom Square (Vabaduse väljak), in the Estonian capital city of Tallinn, after the knifeman was seen wandering around with the dangerous weapon.
People initially backed away and avoided approaching the lone man, who had his trousers rolled up to his knees, in the near-empty public square.
Officers were told the man hold stolen the knife from one of the many shops and restaurants that trade around the square.
Police and the chief prosecutor are due to hold a press conference explaining the shooting in the next few hours.
Vabaduse väljak is a large square to the south of the capital's famous Old Town. It is often used for military parades and music concerts.