A spokeswoman for NSW Ambulance confirmed paramedics were called to a premises on Anzac Parade at 3.10pm.
"One patient with multiple stab wounds was taken to St Vincent's Hospital in a serious condition," the spokeswoman said.
Patrons and staff were evacuated from the pub, along with nearby businesses.
"I was just working ... all of a sudden I hear about four or five gunshots next door," a witness told 2GB.
"I look up, I go outside, there's all these sirens there and I see a guy come out in handcuffs and another guy in a stretcher."
Video has since emerged online of police cordoning off the area around the hotel.
Nearby Maroubra Road has been closed and there is a large police presence in the area.
A statement from NSW Police said a critical incident investigation has been launched following the incident.
"An officer attached to a specialist command sustained stab wounds and has been taken to hospital after a confrontation," the statement read.
"A man died at the scene after a firearm was discharged.
"A critical incident team from the Homicide Squad will now investigate all circumstances surrounding the incident, including the discharging of the firearm."
The investigation will be subject to independent review.
"All information will be provided to the Coroner who will determine the cause of death and make any findings about the events leading to the man's death," according to police.
