The shooting happened just before noon Friday on Globe Avenue near Lexington Avenue, just outside Dos Palos.
When deputies arrived, they say the suspect was armed with a knife and holding a young child hostage. They say he had also tried to set an apartment complex on fire.
The Merced County Sheriff's Office says the suspect was ultimately shot and killed.
Merced County District Attorney's Office investigators and Merced County Sheriff's Office investigators are currently on scene.
Deputies are asking the public to avoid the area.
Stay with ABC30 for the latest details on this developing story.