French media were reporting two shots were fired in the incident near a Marks and Spencer store and it is believed one of the attackers is still at large.
One officer was seriously wounded and the second officer died at the scene.
French President Francois Hollande scheduled an emergency meeting Thursday night. He said the entire area is on lockdown and a full investigation will be carried out to figure out the motive. The French president, Francois Hollande, has come on television saying it is definitely a terrorist attack and is under a terrorist investigation.
The attacker emerged from a vehicle and used an automatic weapon to shoot at officers outside a Marks & Spencer store at the centre of the Champs-Elysees, anti-terrorism prosecutor Francois Molins said. He was shot to death after opening fire on a police van.
Police have detained for questioning three of his family members, as investigators seek to determine whether he was acting alone and where he got his weapons.
The Paris prosecutor's office leading the investigation has said a pump-action shotgun and knives were found in the gunman's vehicle.
After that attack and others in the last two years - many perpetrated by Islamic State militants or those claiming to be inspired by the extremist group - terrorism and national security remain crucial issues in the most contentious election France has seen in decades.
Coming just days after police said they had foiled another planned Islamist attack, arresting two men in the southern city of Marseille, the Champs Elysees shooting dominated the final day of election campaigning.
As of Friday morning local time, leading candidates François Fillon, Emmanuel Macron and Marine Le Pen had all canceled campaign events, with Macron citing the extra burden policing political rallies placed on the security services.
He calls the attack a "terrible thing" and says "it never ends".
Cheurfi was convicted of attacking a police officer in 2001, according to archive reports by French newspaper Le Parisien.
There were other reports it may have been an armed robbery gone wrong, but police have launched a terrorism inquiry and all indications are that it is terror-related.
"The Government is fully mobilised", he said in a statement.
The whole of the Champs Elysees has been evacuated and police vehicles are lined up near a point half way up the avenue around the George V metro station, our correspondent says.
"On the face of it, the officers were deliberately targeted", interior ministry spokesman Pierre-Henry Brandet told France's BFMTV news channel.
"We shall be of the utmost vigilance, especially in relation to the election", he said.
France has lived under a state of emergency declared following a terrorist attack in November 2015 that left 130 dead.
Asked whether the attack was evidence that "Paris isn't Paris" anymore, as claimed by Donald Trump, Ftaiti said the U.S. President is "barking up the wrong tree".
French authorities have also warned their citizens to be vigilant as police continue to investigate whether the assailant, who was shot dead by police officers at the scene, had any accomplices.