"We wanted to take him alive. He declared his attention of killing police officers," Guéant told reporters at the foot of the block of flat in Toulouse where Merah had been under siege for over 30 hours.
Merah, who had said he wanted to die guns in hand, jumped out of the window during an exchange of fire with police, according to the minister.
About 300 bullets were fired, police told Guéant.
He emerged from the bathroom, armed with several weapons, and fired on members of the elite Raid police unit who had entered his apartment by the door and the balcony about 20 minutes beforehand.
"When he hit the ground he was dead," Guéant said.
Two police officers were injured, according to Guéant, one in the foot. Another is being examined by doctors and his life appears not to be in danger.
Merah appears to have laid a trap for police by giving no sign of life for several hours, even when police let off three grenades to try and solicit a reaction.
President Nicolas Sarkozy, who congratulated police on the operation, is to address the nation at 13.00 hours.
Timeline of French attacks