Dozens of people were trapped on the bus on a heavily transited bridge connecting Rio with the neighboring city of Niteroi after it was commandeered by the man, who police said was also carrying a stun gun, lighter and plastic bottle filled with gasoline.

Describing the man as "psychotic," Lieutenant Colonel Maurilio Nunes told reporters a sniper was given the green light to shoot the hijacker when he briefly exited the bus for fear he was about to set the vehicle alight.

The man had placed plastic bottles cut in half and partially filled with gasoline throughout the bus, said Nunes, a member of an elite police squad.

He was taken to hospital where he died, military police said in a statement.

Thirty-seven people were in the vehicle when it was hijacked. Of those, six were freed during the terrifying, nearly four-hour ordeal.

None of the hostages was hurt, police said.

The man, identified by local media as 20-year-old Willian Augusto da Silva, had been carrying what turned out to be a fake gun, military police said, without specifying if it was a pistol.

Heavily armed police had surrounded the bus as they negotiated with the hijacker.

A live broadcast of the scene showed several ambulances parked nearby, receiving hostages as they were released one by one.

The man boarded the Rio-bound bus at around 5:40 am (0840 GMT) and began threatening passengers.

"He said the bus was being hijacked and didn't ask for our belongings," Hans Moreno, one of the passengers, told Globo TV.

"He was very calm, very quiet."

Walter Freire, another passenger, said he thought he was "going to die."

"Thank God the police performed well," Freire told Globo TV.

- 'Save the hostages' -

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Several lanes of traffic on the busy Rio-Niteroi bridge spanning Guanabara Bay were paralyzed during the hostage situation that gripped the city.

Commuters stuck on the bridge could be seen standing outside their cars parked bumper to bumper and taking photos or filming videos with their smartphones.

The bus had been on its way to Rio, a sprawling city of more than six million people where deadly violence is common.

"Ideally everyone would have got out of this alive, but we had to take a decision to save the hostages," said Rio state Governor Wilson Witzel, who was seen pumping his fist in the air after the hijacker was shot.

"We are looking after the families of the hostages and of the person who died."

A member of the hijacker's family had "apologized to the entire society," Witzel told reporters at the scene.

Witzel, whose tough on crime message helped get him elected last year, said he was sure the incident was "linked to organized crime which encourages this type of terrorism."

Police are investigating the hijacker's motivation for commandeering the bus. They said he had no criminal history.

This is not the first time a public transit bus has been hijacked in Rio.

In 2000, a gunman stormed a passenger bus in a fashionable neighborhood of the city. The hours-long hijacking of bus 174 was later turned into an award-winning documentary.

The hijacker and one hostage were killed in that incident.