Trader Joe's worker killed in armed standoff with gunman at Los Angeles supermarket

Twenty-eight-year-old suspect was wanted for shooting his grandmother several hours earlier

An unidentified woman is treated by paramedics after the Trader Joe's shootout (AP)

A woman was killed during a shootout between police and a gunman who ran into a Los Angeles supermarket and held dozens of people hostage for three hours before giving himself up.

The victim, named in media locally as 27 year-old shop worker Melyda Corado, was shot when the suspect exchanged gunfire with armed officers at Trader Joe's in the city's Silver Lake district.

It is not yet clear if she was killed by the police or the gunman, who had earlier allegedly shot his grandmother and injured another woman before crashing his grandmother's Toyota Camry outside the store following a police chase.

Frightened customers and workers dove for cover as police fired at the suspect, shattering the store's glass doors.

Some inside the supermarket climbed out windows and others barricaded themselves in rooms as scores of police and firefighters and 18 ambulances converged on the scene and prepared for mass casualties.

Heavily armed officers in riot gear stood along the side of the store and used mirrors to look inside as hostage negotiators tried to coax the man into freeing his 40 to 50 hostages and surrendering.

At around 6.30pm, the suspect agreed to handcuff himself and walked out the front door, surrounded by four of the hostages.

A suspect is placed in an ambulance outside Trader Joe's in Silver Lake. (KNBC-TV via AP)

Police Chief Michel Moore said the suspect made a "series of demands" during the standoff but crisis negotiators believed they could convince him to surrender peacefully.

"Our hostage negotiators believed they had established a good rapport with him," he said.

Six people aged between 12 and 81 were taken to hospital following the incident but do not have life-threatening injuries. The suspect's grandmother is in a critical condition.

Los Angeles' Mayor Eric Garcetti congratulated police and firefighters for their work and mourned the loss of life.

"The heroism that was shown today was second to none and the teams that were able to respond, secure the perimeter and engage in conversation with the suspect no doubt saved lives today," he said. "Our hearts go out to everyone who has been traumatized."

Police said it was not clear what led to the initial violence when the suspect shot his grandmother seven times at a residence on 32nd street in South LA around 1.30pm.

He forced another woman, who suffered a grazing wound in the incident, into his car and drove off. Officers were able to track the sedan using LoJack — a stolen vehicle tracking system — and tried to stop the suspect in Hollywood.

The man refused to pull over and fired at police out of the back window of the car during a chase before crashing into a fire hydrant or utility pole outside Trader Joe's at around 3.30pm.

Witness Don Kohles, 91, was walking into the supermarket when officers started firing at the gunman as he ran towards the supermarket.

"Those bullets went right over the back of me as he was running right down the main aisle," he said.

Police officers remove a passenger from the car that crashed outside Trader Joe's supermarket (AP)

He lay on the floor and heard other customers sobbing before being rescued by officers about half an hour later. "They helped carry me across the parking lot and they sort of tossed me over a wall," Mr Kohles said.

Five employees were seen climbing out of a second floor window and around 15 other people run to safety from the back of the store. Among them was a police officer carrying a small child, according to local resident Charles Dunlop.

Makela Wilson, 26, an office manager, said she was driving out of the parking lot when the suspect crashed his vehicle and police opened fire.

Officers in SWAT gear arrived and ordered her and other people in their cars to hunch down in their seats, shouting: "Duck down! Duck down!"

It is believed Ms Corado, who had worked at Trader Joe's for around five years, was killed when the suspect exchanged gunfire with police outside the store.

Police and firefighters responded quickly but were unable to safe her life, said police chief Moore.

The suspect was wounded in his left arm during the exchange of gunfire.

Additional reporting by Associated Press.