Police tell The Sacramento Bee that the exchange of gunfire took place about 10:30 a.m. Friday in the Land Park neighborhood. Three schools in the area kept students inside as a precaution.
The suspect shot and wounded a police dog named Bodie, which was expected to recover.
Police identified the man fatally shot by the K-9 officer as a Chico resident believed to be in his 30s. A woman also was in custody.