An Australian woman has been shot dead by police in Minneapolis.

The 40-year-old, was fatally shot in an "officer-involved shooting" in the city's Fulton neighbourhood according to police.

The Sydney woman had been living with her fiance and son in Minneapolis.

Minneapolis police confirmed the incident in a statement.

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"Two Minneapolis police officers responded to a 911 call of a possible assault just north of the 5100 block of Washburn Avenue South just before 11.30pm Saturday," it read.

"At one point an officer fired their weapon, fatally striking a woman.

The officer who shot the woman was under investigation by the Minnesota Bureau of Criminal Apprehension, which was interviewing witnesses and "incident participants".

"At one point an officer fired their weapon, fatally striking a woman.

Minnesota police wear body cameras, but the officers involved did not have their cameras turned on at the time.

Police said a squad camera also failed to capture the incident, and investigators were seeking to determine if any video of the incident existed.

The woman was reportedly engaged to be married.

Her fiance's son told the Star Tribune she had heard a noise from an alley way and called police who attended the scene.

"She was out on 51st Street and she was shot," the son, Zach Damond, 22, said.

"Basically my mom's dead because a police officer shot her for reasons I don't know.

"I demand answers. If anybody can help, just call police and demand answers. I'm so done with all this violence."

Damond said the victim called police after she "heard a sound in the alley."

He left the scene at noon to go to the airport to pick up his father, who had been on a business trip out of town.

A vigil was held on the street where the Sydney born woman was shot by police in suburban Minneapolis. Photo / WCCO
A vigil was held on the street where the Sydney born woman was shot by police in suburban Minneapolis. Photo / WCCO

Friends have begun to pay tribute to the speaker and meditation consultant.

She has been described as an "incredible woman" and a "brilliant, well-known, local healer".

The woman's web page says she "originally trained as a veterinarian" and "has also studied and practiced yoga and meditation for over 17 years, is a qualified yoga instructor, a personal health and life coach and meditation teacher, embracing and teaching the neuro-scientific benefits of meditation."

A vigil organised in part by community activist Mel Reeves drew more than 200 people to the neighbourhood.

Minneapolis Mayor Betsy Hodges said she was "heartsick and deeply disturbed" by the shooting.

"As Mayor of our City, a wife, and a grandmother, I am heartsick and deeply disturbed by what occurred last night," she wrote on Facebook.

"My thoughts are now with everyone affected by this tragic incident, especially the deceased woman and her family."

As I said in my initial statement, I am heartsick and deeply disturbed by what happened last night. I have been working...

Posted by Betsy Hodges on Sunday, 16 July 2017

The Australian Department of Foreign Affairs and Trade said it was providing consular assistance to the family of an Australian woman who died in a shooting in Minneapolis.