Police said they were trying to persuade an alleged a gunman to surrender after a man was shot dead on Thursday in a Western Australia state wheatbelt town.

The 25-year-old allegedly shot a man at a grain silo in Kellerberrin around 8.40am Thursday before fleeing the area, the Western Australia Police Force said in a statement.

Police issued an active shooter alert soon after, warning members of the public to remain indoors as officers searched for the alleged shooter.

He was believed to be on foot, armed and dressed in camouflage clothing north of Kellerberrin, about 200km east of the state capital, Perth.

Police found him at a rural property several hours later.

”We are attempting to negotiate a peaceful resolution, however; the situation is still unfolding,” a police statement said.

”Residents in the area are advised to remain alert,” police added.

Annamaria Lucente, manager at Kellerberrin Hotel Motel, said the close-knit town of about 950 people remained locked down.

”The whole town is in shock,” Lucente said.