Witnesses have described seeing police chase the man through a busy intersection and yelling at him to stop before shooting at him at least twice.
Paramedics and police gave the man first aid at the scene and he was taken to Rotorua Hospital in a serious condition.
Bay of Plenty District Commander Superintendent Andy McGregor said the man shot was known to police, lived locally and was believed to be under the influence of "a substance", possibly methamphetamine.
Police Tasered him three times and used pepper spray, but could not subdue him, said McGregor.
It is the second police shooting in New Zealand this week, after police shot and killed Nick Marshall, 36, in Hamilton on Tuesday night.