A man has died after being shot by police in Tauranga on Sunday following a dramatic standoff where he held a machete to a child's throat.

Police were called to the property in Bellevue just after midnight after the man - who was known to police - threatened his partner with a knife.

The woman managed to escape the house to a neighbour's house where she called police. But three children aged four, six and 11 remained in the house, along with the man.

When police arrived they entered the property to find the man holding a large machete to the throat of one of the children.

The man retreated into a wardrobe with that child and a second child.

Police withdrew immediately, enabling a third child to escape at the same time.

With "grave concerns" for the two children's safety growing due to the heat inside the house and lack of food and water, police entered the property again shortly after 3pm.

There they were confronted by the man holding a knife to the chest of a child.

He was shot by police and died at the scene. The two children who had been kept hostage are safe and uninjured.

"This was an experience nobody should have to go through and all involved will need ongoing care and support as they come to terms with today's events," Bay of Plenty District Commander Superintendent Andy McGregor says.

"The IPCA has been notified of this incident and our critical incident investigation is also underway. The man's death will be referred to the Coroner."

Cordons will remain in place on Oriana Crescent while police complete their scene examination.