Police identified the victim as Zivan Radmanovic, 32, from Melbourne and the injured man as Sanar Ghanim, 35, who was seriously wounded and taken to intensive care at Sanglah Hospital in Denpasar.
Local police chief Arief Batubara said police are hunting for two people believed to be involved in the shooting at Villa Casa Santi in Bali's Badung Regency.
Batubara confirmed Radmanovic died at the scene.
Radmanovic had been in Bali with his wife and they were together in the villa when the shooting unfolded, the Herald Sun reported.
Radmanovic's wife, Jazmyn Gourdeas, witnessed the shooting in the couple's bathroom, Radar Bali reported.
She told reporters that she had fallen asleep around midnight and was woken by gunfire and her husband's screams.
A police spokesman Ariasandy said a witness had provided descriptions of two people who fled from the scene on two motorcycles.
He said the pair were heard speaking English with an Australian accent.
Batubara said an investigation was underway.
"We are currently investigating and working on the crime scene and gathering witnesses at the scene," he said.
The Department of Foreign Affairs and Trade said it was providing consular assistance to the family of the victim.
"We send our deepest condolences to the family at this difficult time," a spokesperson said.
"DFAT stands ready to provide consular assistance to another Australian injured in the same incident."
with AAP and Reuters
8°C