"That is a known hot spot for crime and there was a car parked in an isolated position so it raised suspicion," he said.
When the four officers approached the vehicle from behind, the sedan reversed, hitting a tree.
Devaney said it is believed an officer was struck by the car, however that has yet to be confirmed.
"No police officer comes to work wanting to use lethal force," he said.
"It is a last resort. I don't know what was playing on the mind of the officer at the time but it is the subject of an investigation."
An officer fired one round from his firearm, a fragment of which struck another police officer on the forearm.
Paramedics treated him at the scene before he was taken to the Royal Prince Alfred Hospital where he will undergo surgery to remove the fragment.
The 26-year-old driver and his female passenger were taken to Burwood Police Station where they were interviewed and released on Saturday morning.
"The couple have been extremely cooperative and they assisted us with their inquiries and have been released pending further investigation," Devaney said.