Zhang Fuming had been in a standoff with police since Saturday evening, when he had parked his white Mercedes-Benz car on the Guangyuan-Nanchong Highway and begun shooting a handgun at passing vehicles at random.
"The suspect was in a very frantic state," Wu Changwei, police chief for Cangxi county, told China Central Television shortly after the incident. "Taking into consideration the safety of the hostage, we decided to shoot him dead."
A police statement said lengthy negotiations with Zhang failed, and that two handguns and ammunition were later found in the car, which did not have a license plate.
Zhang, 47, from nearby Chongqing, was driving from Guangyuan toward Nanchong with a female passenger when he pulled over to the side of the road and started shooting at pedestrians and vehicles, the statement said.
He then carried on driving before stopping again on the highway bridge in Cangxi and shooting at vehicles.
Three motorists stopped their vehicles after they heard cries for help from the woman in Zhang's car. One man was shot in the stomach, leaving a wound that police said is not life-threatening.
Officers arrived at the scene shortly after the shooting. Over the next 12 hours, Zhang twice fired a series of shots at police and demanded he be given drugs.
A tear gas canister was fired into Zhang's car at about 9 am on Sunday. Police said he attempted to leave the vehicle while still holding the woman hostage, at which point he was shot by a police marksman.
The identity of the woman has not been revealed. Police said that Zhang has a history of drug use.
It is illegal to possess guns in China. Police are trying to learn where Zhang obtained the two guns that were in his possession.
