The woman, who does voluntary rehab work with prison services, was in the street with the man, Mr Loveday said.
"He had a rifle in his hand. He kept going forward and back.
"She was trying to talk him down. She said she had a good liaison with him. He was going to put the rifle down. She was only a metre away when he was shot dead.
"She was pretty adamant he was going to give himself up. She didn't know him. She said he told her he was trying to get into the army and was rejected because of his police record."
Witness Ugur Kokcu saw the woman talk to the gunman for a couple of minutes.
The gunman was animated at times. The rifle was mostly by his side but when he raised it slightly, he was shot twice by police, Mr Kokcu said.
Subway worker Nikki Hearfield said the gunman looked like he was in his late 20s.
"He wasn't holding the gun aggressively. It was just in his hand to the side."
She heard police fire two shots.
Superintendent Sam Hoyle said he could not comment at this stage on suggestions the gunman was being talked down.
"On arrival police staff were fired upon. They have spoken with the man involved and attempted to negotiate a peaceful resolution. After some minutes he has been shot by police. He has then been offered medical support by both police officers and Wellington Free Ambulance staff. Unfortunately he has died at the scene in what is a tragedy for everyone involved."
Mr Hoyle said police had informed the man's next of kin were being informed.
They and the officers involved were offered support.
Nobody else was injured and a police dog released at the scene was also fine.
Mr Hoyle said the man was brandishing a "high-powered" rifle.
Wellington Free Ambulance spokeswoman Di Livingston said two ambulances were sent to the scene but an off-duty paramedic was first to reach the shot man.
"Then heaps and heaps of cops started storming the street. Officers were screaming for people to get in the buildings... the street started to empty out. There wasn't anyone anywhere."
Nearby St Joseph's school went into lockdown briefly but was told about 1.35pm that the situation was safe. A spokesman said it was lunchtime when the alarm was raised so bells rang and the children went briefly back into their classrooms.
Police Association President Greg O'Connor said today's shooting was the fifth time in a month frontline response police officers have had to deal with "armed and clearly dangerous offenders".
"This afternoon's incident in Upper Hutt follows similar incidents in Palmerston North, Hamilton, Raetihi and Motueka, all in the last month," he said .
"In each of these incidents, the officers involved have been required to take immediate action in situations governed by the actions of armed offenders."
Mr O'Connor said police bosses and the Government had given "constant reassurances" that armed incidents were not the result of changes in the criminal world. He said it showed top brass were "out of touch".
He said the incidents had occurred at a time when the numbers of frontline police deployable to such incidents were being reduced due to funding issues.
"The Police Association on behalf of its members asks how many such incidents it will take before the changing nature of the policing environment is acknowledged by authorities," he said.
"The Police Association will fully support the officers involved in the shooting, and we ask that those who wish to comment on the officers' actions should await the outcome of the properly conducted and intense inquiries that will follow today's incident."
A spokeswoman for Police Minister Michael Woodhouse said it was "very much an operational matter and we have no plans at this stage to make any comment".
This is the sixth high profile incident involving firearms in a month.
On August 10, a man walked into the Palmerston North Police Station and opened fire, narrowly missing the staff member behind the desk.
Earlier that night, he allegedly shot out the windows of the nearby Highbury Police Station.
In Hamilton on August 14, a man who drove through a police checkpoint fired at police before jumping off a bridge into the Waikato River.
On August 19, police spent a day searching for five fugitives in the central North Island after one fired at officers who pulled them over in Raetihi.
The next day, police shot Ford William Hurinui, 27, who was wanted over a parole breach, in Motueka.
And on August 28, armed officers swarmed central Auckland after reports of an assault involving firearms on Lorne St in the CBD.
List of police shootings
• August 2, 2015. David Cerven, 21, was shot dead in Myers Park. A Slovakian national here on a working holiday visa, Cervan was wanted in connection with three armed robberies. Two officers apparently fired on him within moments of each other; • May 3, 2015. Vaughan William John Te Moananui, 33, was shot after he refused to surrender to police, and pulled out a gun in Thames. He was taken to hospital but died shortly afterwards.hortly afterwards; • July 7, 2013. Caleb Henry, 20,was shot on Auckland's northern motorway after committing a home invasion in Opotiki. Officers chased him from Cambridge and eventually stopped him with road spikes. He was pointing his gun at officers when a member of the Armed Offenders Squad (AOS) fired and killed him; • June 8, 2013. Adam Te Rata Charles Morehu, 33, was shot and killed after shots were fired at police at the New Plymouth Golf Club in June 2013. The IPCA later said poor communication and a lack of command and control during this incident contributed to the events that unfolded; • July 15, 2011. Anthony Ratahi, 46, was shot and killed as he struggled with a police dog following a siege in Opunake, 65km south of New Plymouth. He had been holding ex-partner Marcelle Beer hostage at the Headlands Hotel for 12 hours prior to the killing; • March 28, 2011. Lachan Kelly-Tumarae, 19, was shot four times by an officer after a police chase in Omahu, near Hastings. Kelly-Tumarae was killed after he stopped his car and pointed a gun at officers; • June 28, 2009. Shayne Sime, 42, was shot dead by police after a two hour standoff with police in June, 2009, which left an officer and a neighbour injured in the Christchurch suburb of Burnside. Mr Sime, who was wheelchair bound was believed to be depressed at the time and his death was later ruled a suicide; • 23 January, 2009. Halatau Naitoko, 17 - an innocent bystander - was shot dead by police on Auckland's North Western Motorway. Mr Naitoko was caught in the cross-fire of police aiming at Stephen Hohepa McDonald, 50, who had fled and shot at police from a stolen car following an aggravated robbery; • October 23, 2008. Lee Jane Mettam, 37, was fatally shot by a member of the Armed Offenders Squad in 2008 after she threatened to kill the staff of a Vodafone store in Whangarei and aimed her rifle at police; • September 26, 2007. Stephen Bellingham, 37, shot dead by a policeman in Christchurch about 8.30pm after smashing cars/car windows with a claw hammer. Said to have been on a party-pill binge. Advanced on the police officer with the hammer. Warned but kept advancing. Hit in chest (fatally) and one leg. Policeman said to have fired four shots (these details just four days later); • August 14, 2004. Haidar Ebbadi Mahdi 37, died from a bullet to the head as he stabbed his wife being held in a headlock in a South Auckland house on Saturday afternoon; • April 30, 2000. Steven Wallace, 23, of Waitara, shot after a window smashing spree in the town; • July 1, 1999. Edwin Leo, 31, shot near Helensville, Auckland, following a car chase; • September 21, 1996. James Raharuhi killed by a single police bullet at a service station in Greenlane, Auckland; • June 24, 1996. Terence Thompson shot in a Havelock North orchard. Thompson was the prime suspect in the slaying of Constable Glenn McKibbin; • November 20, 1995. Barry Radcliffe shot after taking a rifle from a sporting goods store in Whangarei; • September 28, 1995. Eric Gellatly shot in Invercargill, after he took over a sports shop in the central city and began firing indiscriminately; • July 29, 1993. Larry Hammond died after being shot three times in the Morrinsville police station; • November 14, 1990. Members of the anti-terrorist squad shot David Malcolm Gray after he killed 13 people at Aramoana, Otago; • October 27, 1990. Paul Melvin Stowers died after being shot in the forehead by a detective whom he threatened with a shotgun in Newmarket, Auckland; • March 14, 1986. Benjamin Wharerau shot as he took a hostage in a robbery of a Dargaville bank; • June 6, 1985. Kevin David Fox was shot after he killed his wife in a car in Gore; • April 18, 1983. Paul Chase shot by the armed offenders squad in a raid on a Petone, Wellington, flat; • December 24, 1982. John Edward Morgan shot near Wainuiomata, Wellington, after throwing an axe at police; • May 20, 1979. Nicholas Panayi shot by the armed offenders squad outside his Henderson, Auckland, home after a domestic dispute; • October 4, 1976. The armed offenders squad shot Daniel Houpapa after he fires at an officer in Taumarunui; • 1975. Edward Ross shot by the armed offenders squad as he stabbed his daughter after escaping from a Christchurch psychiatric hospital; • April 16, 1970. Bruce John Glensor, holding two hostages in a Wellington house shot by the armed offenders squad when he threatened to shoot an officer; • December 14, 1949. Waata Haremia Momo shot in Weedon, Canterbury, after exchanging shots with police; • October 20, 1941. West Coast farmer Eric Stanley Graham killed after shooting three policemen and three civilians.