Police in 14 division were dispatched to a call about a person with a knife aboard a streetcar near Dundas Street West and Bathurst Street just after midnight.
The SIU said there was an "interaction" with a man and police before he was taken to St. Michael's Hospital with a gunshot wound and pronounced dead.
A video posted online by Martin Baron shows at least four officers positioned near the sliding front doors of the parked 505 Landsdowne streetcar, one of whom had their gun pointed.
Baron told CBC News he heard police shouting "drop the knife" multiple times. Several gunshots were fired a short time later.
"I could see a guy standing up with a knife, and it wasn't a big thing, maybe five or six inches long," Baron said. "There was no apparent attack. I didn't see him attack anyone."
Baron said police rushed into the streetcar after the shots were fired to perform CPR on the victim.
No other details on the victim's age or identity have been released.
The SIU says it has assigned six investigators and two forensic investigators to the incident.
The SIU investigates all incidents involving police in which death or serious injury occur, or when allegations of sexual assault are raised.
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