Lone gunman armed with shotgun seen opening fire at passing cars and police

The moments leading up to a dramatic police shootout in Queanbeyan on Saturday morning were captured on CCTV vision and have been obtained exclusively by 9NEWS.

A lone gunman wanders across a street in New South Wales, clutching a double-barrelled shotgun under his arm.

He pauses near a police station, and raises his weapon - before firing shots at a passing car.

The vision shows the gunman roaming with a weapon on Monaro Street around 4am, before opening fire.

Police say they received calls from distraught residents claiming an armed man was firing shots at random.

When police arrived at the scene, they say they took shelter as the man approached.

"They've attempted to contain the issue as best they could, unfortunately that wasn't able to be done," NSW Police Assistant Commissioner Peter Barrie said.

"The offender confronted one of our officers and was shot at that point".

The 59-year-old Queanbeyan man was shot in the hip, and remains in hospital.

Meantime, officers seized eight firearms and ammunition during a raid at a home nearby.

Locals have told 9NEWS the man is a hunter from a well-known Queanbeyan family, and had been struggling with mental health issues.

A critical incident investigation is underway.

Charges have not yet been laid.