Officers were called to Melton, west of Hull, at around 5pm after reports from the public of a disturbance, possibly involving a gun.
When police arrived at the address in Melton Old Road, one man was found to have suffered serious wounds. He was treated by paramedics at the scene but they could not save him.
A second man was also found to be hurt and was treated at the scene. His injuries were not thought to be life-threatening.
According to reports, armed police were stationed outside a local hospital where the man may be receiving treatment.
Humberside Police said three men were arrested at the scene and were helping with inquiries.
A force spokesman said: “Police were called to a residential property in the Melton Old Road area of Melton at around 1700 this evening following reports of a disturbance possibly involving a firearm.
“On arrival, officers found one man at the address who had suffered serious injuries. He was treated at the scene by paramedics but sadly pronounced deceased.
“A second man was also found at the address having been injured, however his injuries are not life threatening.
“Following initial inquiries, three men were arrested in connection with the incident.
“A large area around the scene at Melton Old Road remains closed at this time as officers conduct inquiries in order to establish the circumstances which lead to the incident.
“I would advise the public to avoid the area at this time as there may be some disruption while the incident is cleared.”
Anyone with information should contact Humberside Police on 101 quoting log number 502 of 20/5/2014.
According to social media, up to 40 armed officers flooded into the village, which was partially sealed off by police.
Humberside Police initially released few details of the incident, save to warn drivers that they faced long delays.
Trevor Hulse, who lives a few doors down from the bungalow where the incident occurred, said: “I think they are a traveller family and from what I’ve heard there has been a dispute about money. I don’t know much about them but we would always say hello in passing.
“I heard the gunshots and thought that lorries had crashed into each other on the road behind. When I came out of my house my neighbour was standing in her front garden and said that she had seen a man lying on the ground with his stomach hanging out.”
A neighbour who lives opposite said: “They are pleasant people. He keeps his garden immaculate and they’ve got nice cars. I didn’t know what had happend until I saw all of the commotion outside. There were a lot of police and people who had come down to see what was happening.
Alison Peck, the new chairman of Welton Parish Council - the neighbouring village - who lives in Melton, said: “We are fairly near Hull.
“We are a small village of round about 300 houses with a large secondary school just around the corner.
“It’s very quiet, quite rural and normally very peaceable.”
She said police cordons were still in place tonight.