, The 55 year old was holed up with an arsenal of hunting guns in his home at Grosspriel near Melk, some 90 kilometres (55 miles) west of Vienna, police spokesman Johann Baumschlager said.
He legally owns several weapons and lots of ammunition, mostly for hunting, a popular pastime in Austria, reportedly including a powerful hunting rifle able to pierce protective clothing.
“He appears to be heavily armed,” Baumschlager said, calling the situation “terrible and very explosive”.
Media reports said that “Cobra” police commandos had late on Monday attempted to stop the man, a well-known poacher, in his car near Annaberg after a tip off that he was hunting illegally.
He drove through a road block however and opened fire, reportedly after driving into a ditch, shooting one of the police commandos in the neck who died two hours later in hospital.
While the commando was still receiving medical attention some 50 minutes later the poacher opened fire again, killing an ambulance driver and leaving a second policeman injured.
The suspect, who owns a transport company, then fled on foot for several kilometres before firing at two other police officers, killing one on the spot and taking the other hostage.
He stole their police car and drove, with his captive, some 60 kilometres to his farmhouse.
Police said on Tuesday afternoon that the dead body of the officer taken hostage had been found in the police car in a shed at the farm.
The house has been surrounded since around 7:00 am (0500 GMT) by around 100 police, who have so far failed to make contact with the gunman, despite help from acquaintances trying to phone him.
In the meantime he has fired several shots at the police surrounding his property.
“He opens fire whenever he sees someone,” the Austria Press Agency quoted police as saying.
An AFP photographer at a nearby police roadblock saw three army tanks heading for the farmhouse.
Reports said that the man’s children may be inside the house with him although police said he lived alone. The surrounding area has been cordoned off.
The poacher was well known locally for giving police and licensed hunters the run-around, often leaving the heads of dead animals on roads.
He was said to have had his hunting licence revoked several years ago.