Embattled Minneapolis Police Chief Janee Harteau has resigned after coming under fire for not returning from a holiday when one of her officers shot unarmed Australian woman Justine Damond.

Key points: A statement from the city's mayor said she had "lost confidence in the Police Chief's ability to lead"

A statement from the city's mayor said she had "lost confidence in the Police Chief's ability to lead" The resignation comes after marches and protests over the shooting of Australian woman Justine Damond

The resignation comes after marches and protests over the shooting of Australian woman Justine Damond Chief Harteau was away backpacking when the incident occurred, and only addressed media yesterday

Ms Damond was shot by junior officer Mohamed Noor after she called 911 late last Saturday night, fearing a sexual assault was happening in an alleyway behind her house.

The Police Chief's decision to step down came just a day after making her first remarks on the death of the 40-year-old.

She was out of the city in the days after the shooting, and said yesterday she had been on personal time and was in touch with her command staff.

A statement from the city said Chief Harteau quit at the request of Mayor Betsy Hodges.

"I've lost confidence in the Chief's ability to lead us further — and from the many conversations I've had with people around our city, especially this week, it is clear she has lost the confidence of the people of Minneapolis as well," the Mayor said in a statement.

"For us to continue to transform policing and community trust in policing — we need new leadership at MPD.

"I asked Chief Harteau for her resignation, she tendered it, and I have accepted it."

"This is a victory," an activist said after Chief Harteau's resignation. ( ABC News: Conor Duffy )

Chief Harteau said in a statement she was "proud of the great work the MPD has accomplished".

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"However, last Saturday's tragedy, as well as some other recent incidents, have caused me to engage in deep reflection," she said.

"Despite the MPD's many accomplishments under my leadership over these years and my love for the City, I have to put the communities we serve first.

"I've decided I am willing to step aside to let a fresh set of leadership eyes see what more can be done for the MPD to be the very best it can."

Current Assistant Chief Medaria "Rondo" Arradondo has been nominated by the Mayor to succeed Chief Harteau.

Ms Damond's death is being investigated by the Minnesota Bureau of Criminal Apprehension.

The chief's decision came as investigators tracked down a witness to the incident, after earlier saying they were searching for a cyclist who stopped and watched as officers performed CPR on Ms Damond.

A source with direct knowledge of the investigation said the witness had filmed part of the encounter, the Star Tribune reported.

Ms Damond was due to get married next month, after moving to the US in 2015. ( Linkedin: Justine Ruszczyk )

Hundreds march after Police Chief's remarks

The Police Chief yesterday addressed the media after Ms Damond's shooting, saying Mr Noor had violated department training and procedures and the Australian's death "should not have happened".

Neither of the officers involved had their body cameras turned on at the time, which has drawn widespread criticism of the department.

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"Justine didn't have to die … I believe the actions in question go against who we are as a department, how we train and the expectations we have for our officers," Chief Harteau said.

"On our squad cars you will find the words, 'To protect with courage and serve with compassion'. This did not happen.

"I want to assure Justine's family, our community and those in Australia that I will do everything in my power to ensure due process is followed and justice is served."

The shooting has heightened tensions in the community, reopening a deep rift between locals and the authorities just over one year after Minneapolis man Philando Castile was shot and killed by police officer Jeronimo Yanez.

Mr Noor's lawyer, Tom Plunkett, reportedly told US news he had asked that an independent laboratory test be carried out to see if there were any drugs in Ms Damond's system at the time of her death.

But Mr Plunkett has denied the reports, telling AAP it was a "total misquote" and was "not true".

Hundreds of people turned out to march in protest of the shooting after Chief Harteau's press conference, calling for justice and chanting "no justice, no peace, prosecute the police", and "if Justine don't get it, shut it down".

Castile's family joined the protesters, with his mother Valerie saying she "just had to come out today".

The group demanded Mr Noor be prosecuted and fired if he continued to refuse to talk to investigators, and called for the release of the dashcam footage from the 911 call.