Johor Criminal Investigation Department chief Datuk Kamarul Zaman Mamat said the suspect aged 44, was believed to have entered the shop at 8.20pm and demanded money from the victim.
Failing to get the cash, the suspect confined the victim in a room at the shop. Police tried to negotiate with him for four hours.
Kamarul Zaman said although the victim's family paid the RM300,000 demanded by the suspect, he still refused to let her go.
"It was when the suspect tried to shoot the victim that police took action and fired at him," he told reporters at the scene here, early today.
Kamarul Zaman said police fired two shots which hit and killed the suspect, around 12.30am.
The victim is safe but traumatised and has been sent to Sultanah Nora Ismail Hospital here.
Police recovered two pistols, a revolver and a semi-auto Smith and Wesson which were loaded.
"We are investigating the connection between the victim and suspect. They probably knew each other," he said, adding, police were still investigating the motive.
