The shooter opened fire with an automatic weapon on a police car on the world-famous boulevard at around 9:00 pm (local time) yesterday, prompting tourists and visitors to run for their lives.
After killing the officer and injuring his colleagues, the gunman was shot dead in return fire while trying to flee on foot, police sources told AFP.
"The perpetrator of the attack in Champs Elysees in central Paris is Abu Yussef the Belgian and he is one of the Islamic State's fighters," said an IS statement published by its propaganda agency Amaq.
The attacker was known to French anti-terror police, sources told AFP, and raids took place at his address in a suburb to the east of Paris.
Observers had long feared an attack ahead of Sunday's election in France, following a string of atrocities by extremists since 2015 that have claimed over 230 lives.
The impact on the outcome of one of the most unpredictable contests in decades is unclear, but far-right leader Marine Le Pen and scandal-hit conservative Francois Fillon immediately cancelled their campaign events for today.
Up until now, polls showed voters more concerned aboutunemployment and their spending power than terrorism or security, though analysts warned this would change in the event of further bloodshed.
The shooting comes two days after the arrest of two men in southern Marseille with weapons and explosives who were suspected of preparing an attack to disrupt the campaign which concludes on Sunday.
French President Francois Hollande, again forced to address the nation after an attack, promised "absolute vigilance, particularly with regard to the electoral process" and paid tribute to the police.
Le Pen earlier welcomed security moving to the heart of the campaign yesterday as she took part in a prime-time interview show alongside 10 other presidential candidates.
"We are suffering the consequences of a laxity that has continued for years," she said shortly before the shooting, promising to take a hard line against extremists and anyone suspected of being an Islamist.
For weeks, centrist former banker Emmanuel Macron and Le Pen have been out in front but opinion polls now show there is a chance that any of four leading candidates could reach the second-round runoff on May 7.
Though Le Pen and Macron are the frontrunners, conservative candidate Fillon and far-left firebrand Jean-Luc Melenchon have closed the gap substantially in the last two weeks.
"The first responsibility of the president is to protect," Macron said on the interview show. "This threat will be part of our daily lives in the next years."
As the first details filtered through, US President Donald Trump sent his condolences and said that "it looks like another terrorist attack. What can you say? It just never ends."