A police officer has opened fire and killed a knife-wielding man in Tuen Mun, sources say.

The incident happened at around 7pm on Thursday near Tuen Mun Town Hall, where a man in his 30s was seen carrying a knife.

It's understood that the man, who took a knife from a store, ignored warnings from police. That prompted officers to pepper spray him but to no avail.

He's then said to have grabbed a woman and held her hostage before an officer fired two shots at him.

A video circulating on social media showed residents in the area fleeing the scene as the man brandished a knife on the streets.

Equipped with shields and helmets, a number of officers were seen attending to the man on the ground after shots were suspected to have been fired.

The man was said to be unconscious when he was taken to Tuen Mun Hospital, and was later pronounced dead.