Police marksmen shot the attacker up to five times after he fired at Tony Brindle outside his home in Rotherhithe, south-east London.
An investigation has been launched which will examine how armed police officers, who had staked out Mr Brindle's house in a lengthy undercover operation, failed to prevent the shooting.
Police reported that the attacker fired a shotgun from inside a parked van through the front windscreen at Mr Brindle as he was walking by. The man then got out of the vehicle holding a gun and walked towards his victim.
Armed police officers shouted a warning. "He turned to face them with the gun in his hand and they opened fire hitting him several times," said a police spokeswoman.
Mr Brindle, 30, suffered stomach and leg injuries and was taken to hospital where he is said to be in a "stable and comfortable" condition. The other man was flown by air ambulance to hospital with serious chest, arm and leg injuries.
Members of Tony Brindle's family have been connected with a long-running gangland feud between rival clans in south London. Tony and his brother Patrick were acquitted in 1991 of the murder of the cousin of London's most feared criminal family, the Arifs.
In the early 1990s, there were several murders and numerous shootings linked to the dispute. The police had hoped the rival groups had come to a truce, but yesterday morning's outburst brings fears of a new spate of shootings.
The shooting, which happened in Christopher Close just before 11am, followed a surveillance operation by the South East Regional Crime Squad, aided in its final stages by officers from Scotland Yard's SO19 firearms unit.
Mandy Boyd, 26, a witness, said: "There were about seven or eight detectives running towards this guy, they were all carrying sub-machine guns and screaming at him to stop.
"The officers opened fire. I can't even remember how many shots they fired but I can picture in my mind the guy being thrown off his feet and landing on his back.
A neighbour, who did not want to be named, added: "I looked out and I saw a man on the ground. He was face down. Police were surrounding him with guns and were shooting him. Then they turned him over. We didn't hear them shout `Police' or give any warning."
Another resident added: "I saw about four police officers leap out of the back of a British Gas van. They had obviously had the house under surveillance for some time."
Tony Brindle's wife Jane said yesterday that her husband was "fine". Asked if she had any criticism of the police's failure to protect him, she said: "They've got nothing to answer."
The Police Complaints Authority is to oversee an investigation into the shooting of the man wounded by the police.
In May 1992, Tony Brindle, a market trader, was cleared, along with his 30-year-old brother Patrick, of the murder of Ahmed "Abbi" Abdullah, 30, who was shot in a betting shop at Walworth, south London, in March 1991.
A third Brindle brother, David, 23, was shot dead in The Bell pub in south London in August 1991. Another customer, apparently unconnected to Brindle, was also killed. One of the two attackers shouted: "This is for Abbi," before opening fire.
Abdullah was a cousin of Dogan Arif, head of the powerful and feared Arif family, who was jailed for his part in an pounds 8.5m drug smuggling racket.
In 1993, James Moody, who had been on the run from jail since 1980, was shot dead in a pub. Moody is believed by many to have been responsible for the murder of David Brindle.Reuse content