Police say the dead, Khurshid Alam, 38, used to head a gang of robbers and had faced charges in 30 cases involving murders and robberies.
Noakhali's Additional Superintendent of Police (ASP) MS Ashraf Uz Zaman said that a gunfight between police and the robbers started around 1am at the Upazila's Abu Torab village that left four policemen injured.
Police recovered three firearms and four machetes from the spot.
The police officer said Alam had been arrested from Dhaka on Tuesday. Based on information gathered from him, police took him to Noakhali and raided the area,
"Khorshed's (Alam) accomplices fired at police in a bid to snatch him. The police also opened fire. Khorshed died during the shootout," said ASP Zaman adding his accomplices managed to flee.