Police said that the officer fired at least one round at the suspect but that it was possible the gunman took his own life. He was identified as Larry McQuilliams, 49.
The motive for the violence was not known, though Austin Police Chief Art Acevedo told reporters that, based on the targets, he believed the shootings were possibly a show of "violent antigovernment behavior."
"If you look at the targets that were hit, it doesn't take a genius to figure out that that's a potential," Acevedo said
The FBI is assisting with the investigation, a spokeswoman said.
"The primary focus of the FBI is of course the federal courthouse and the Mexican Consulate," said Michelle Lee, a spokeswoman for the FBI's San Antonio office.
The shootings began around 2:20 a.m. as bar patrons spilled into downtown streets after closing time. Within about 10 minutes, the gunman fired at least 100 rounds across downtown, police said.
"This time of night, that's really dangerous," Acevedo said.
Acevedo said a sergeant was putting away two mounted patrol horses at police headquarters when he heard shots and saw bullets ricocheting off the building. He spotted the gunman and returned fire, and the suspect went down.
A police spokesman told reporters that as officers approached the suspect to assess him, they saw "what appeared to be an improvised explosive device" in the car next to him. Police dragged the suspect away from the car, the spokesman said, then noticed he was wearing a vest.
At that point, officers backed away and called in a bomb squad to investigate. The bomb squad later declared the scene safe.
Hans Paap, 36, lives in a nearby apartment, where he had just spent his first Thanksgiving as a newlywed, and was startled awake by the gunfire.
"I woke up to loud bursts. I went and took a look out the window, heard another round and saw some muzzle flashes in front of the Austin Police Department," Paap said. "At that point, my wife yelled at me to get down and get away from the window."
Within minutes police swarmed the area and Paap ventured out on his third-floor porch to watch a tactical team approach a white vehicle, then retreat and send in robots. He later watched as a bomb squad member investigated. Plainclothes officers followed once given the all-clear.
"It's now an active crime scene, but the tension dissipated," Paap said shortly before 11 a.m.
Paap manages Summit, a downtown nightclub, and usually is heading home shortly before the time the shooting erupted. Bar patrons were in the area, police said, but Paap said the crowds looked smaller than usual.
"It's very fortunate, the timing," he said of the shooting coming during a holiday week when many revelers were at home.
"To have somebody upset enough to take those actions is also concerning," Paap said.
The officer who shot at the man, a 15-year veteran of the force, is now on paid administrative leave.
Police descended on the suspect's apartment complex in south Austin a few hours after the shooting. One resident, Michael Finney, said officers pounded on his door at 4:30 a.m.
The officers said that Finney, his wife and other residents in the 20-unit complex would have to leave immediately.
"I asked why and they seemed reluctant to say anything," said Finney, 59, an adjunct professor of English at Austin Community College. "So I asked if there was a bomb threat, and they said it could be."
Finney asked when they could return.
"They said they were not sure, but to watch the news," he said.
McQuilliams, whom neighbors knew as Steve, was a big man — about 6-foot-2 and 200 pounds, but also "gentle acting," Finney said.
McQuilliams was balding, with longish hair that hung over his ears, Finney said. He had lived there for about a year, alone with a pet cat named Lily, and would bicycle to work at a car wash, Finney said.
"All the weapons and stuff — I had no idea he had weapons," Finney said. "He was not scary at all."
Finney could not recall the man ever talking politics or complaining about anything other than co-workers at the car wash.
"As far as I know, he didn't harbor any grudges," Finney said. "I never would have imagined he was capable of something like that."