Witnesses said two people escaped, leaving rifles and ammunition in a car in the Jamayia district of Jedda where police shot dead another suspected insurgent earlier this month.
A policeman on the scene said the dead man was wanted on security issues but provided no other details about the shootout early on Saturday evening.
The interior ministry later released a statement which said a small amount of ammunition and money was found on the man.
“Security forces surrounded a car used by a wanted person, and when he saw them he tried to use a hand grenade in his possession, then died after being fired upon,” the statement read on Saudi state television said.
About 170 people, including foreigners, security forces and
insurgents, have been killed in violence between rebels and security forces in the past 18 months ago.