No one apart from the attacker was hurt in the incident in the city of Bandung on Java island, which started with a pressure cooker bomb exploding in a park before the gunbattle erupted in the office opposite.
Police said the attacker was a former terror convict from an IS-supporting network called Jamaah Ansharut Daulah, which has been blamed for a series of recent attacks in the Muslim-majority country including an assault in Jakarta last year.
Police exchanged fire during an hour-long standoff with the man. He was shot in the stomach and died later in hospital.
Everyone was evacuated from the building unhurt. Police seized guns and two backpacks carried by the attacker but did not say what they contained.
National police chief Tito Karnavian said the attacker belonged to Jamaah Ansharut Daulah (JAD) and had demanded that authorities release his associates from prison.
Indonesian security forces have arrested hundreds of militants during a sustained crackdown in recent years.
He said the attacker, whom he did not name, had been jailed over his involvement with militant training in Jantho in Aceh province. Jantho was the location of a notorious Islamic extremist training camp, which was closed down by authorities in 2010.
Last month the United States designated JAD a terrorist organisation, saying the network was an umbrella group for about two dozen Indonesian extremist outfits.
Last year's gun and suicide attack in the capital left four attackers and four civilians dead, and was the first assault claimed by IS in Southeast Asia.
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