The traders were returning to their neighbourhood after buying vegetables from the wholesale market in Manikganj’s Jaagir.
Mohammad Russell, also known as Kala Russell, was a member of a robbery gang, police said.
Police Inspector Moktar Hossain said Russell was arrested on Thursday in connection with one of the 20 cases stacked against him.
Police took Russell along in their search for arms and ammunition in a neighbourhood in Chandraganj on Friday morning.
A police raid prompted other members of the robbery gang to open fire leading to an intense gunfight that left Russell injured.
Doctors declared him dead after he was taken to hospital.
The police seized a gun, a pistol and some bullets from the scene.