The attacker, named by police as 26-year-old Redouane Lakdim, screamed "Vengeance for Syria!" before shooting at cops in Trebes, south-east of Toulouse.
Police union official Yves Lefebvre confirmed Lakdim was killed moments after French President Emmanuel Macron said all evidence suggested a terror attack. The shooter had demanded the release of Paris attacker Salah Abdeslam.
The police had brought the hostage taker's mother, who lives in Carcassonne, to the superstore to persuade him to stop.
"She's gone to talk to him – to try and get him to drop his weapons, and give up," said a source at the scene. "His sister is there too."