The 34-year-old suspect killed one person and seriously injured three others at Grey club in the southern city of Konstanz in the early hours of the morning.
He was then fatally wounded after exchanging gunfire with police officers outside the music venue, after they had rushed to the scene shortly after the terrifying incident at 2.30am.
The gunman, who has not yet been named, then died in hospital.
The motive for the shooting remains unclear. One police officer was also injured in the exchange of gunfire.
German police said in a statement that special commando forces had been deployed in the city, as it was not clear if the suspect was acting alone or if he had accomplices.
It follows a similarly deadly incident in Hamburg on Friday, where a failed asylum seeker killed one person and injured six others.
Officials said he was an Islamist known to security forces, and added that he was psychologically unstable.