"The man refused to be arrested and fired a rifle at police", a local government official on the island said.
Earlier in the day, an armed man opened fire on two police officers from the National Police Intervention Group (GIPN) during his arrest.
Anti-terrorism prosecutors have taken over the investigation because the man was suspected of links to radical Islam, according to Paris prosecutor's office spokeswoman Agnes Thibault-Lecuivre. Police found materials that could be used to make explosives in his home.
"Matthias FEKL, Interior Minister, and Ericka BAREIGTS, Minister of Overseas, express their full support to the two police officers wounded this morning at Saint-Benoit while being on duty..."
"After responding to shots, the policemen managed to restrain the assailant", it said.
The suspect, aged in his 20s, is now in custody.
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The country is under a state of emergency after multiple Islamic extremist attacks.
French overseas territory in the Indian ocean of La Reunion.
Last week, a police officer Xavier Jugelé was shot and killed on the Champs Elysées in Paris.
Authorities in Reunion estimate there are around 100 radicalised Islamists on the island.
France remains on high alert as it prepares to choose between centrist Emmanuel Macron and far-right leader Marine Le Pen in the second round of the presidential election on May 7.
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