The shooting occurred just before 8 p.m. around Queen Street West and Peter Street in the city's entertainment district, which was bustling with people on the Canada Day long weekend.
Three people were taken to hospital following the shooting, but police say one of the victims later succumbed to his injuries and was pronounced dead in hospital.
Paramedics said earlier that two male victims were taken to hospital in life-threatening condition. One of the males was believed to be in his 20s, CBC News reported.
A woman in her 30s was in serious but non-life threatening condition, according to paramedics.
Police had previously said one person at the scene was without vital signs.
Witness Dennis Grimble said he was at the corner of Spadina Avenue and Queen Street West at the time of the shooting.
"I heard what sounded like construction work. It sounded like a lot of people hammering really quickly and the echoing off the buildings," he said.
"Then I saw probably about 50 people running west down Queen past Spadina, and so we started running also."
Lise Robichaud was on a streetcar in the area when she said she heard a gunshot.
"I looked outside, I saw a black male fall to the ground, then I heard four more gunshots," she said.
"The TTC driver told us to get to the ground because it was a shooting. It's terrifying. I'm still shaking. It's very scary."
Two suspects were seen running north and may have fled in a black SUV or white car, police said.
Queen Street West is closed between Peter Street and Spadina Avenue as police investigate.
Toronto police's homicide unit has taken over the investigation.
Saturday's shooting death marks Toronto's 49th homicide of the year. There have been over 200 shootings this year, according to Toronto police.