Mr Tabuni was killed after resisting arrest in Papua's main town, Jayapura, the authorities said. He was wanted for causing unrest in the province.
Activists and human rights groups say Mr Tabuni was unarmed when he was shot.
He was one of Papua's most vocal independence activists. Locals set vehicles and houses ablaze in Jayapura.
The violence occurred in the Waena suburb of the town, where Mr Tabani was killed.
He was one of the key leaders of the Papuan independence movement and had repeatedly called for the Indonesian government to hold a referendum in the province.
Mr Tabuni's killing has sparked a controversy as to whether he could have been taken alive by the police.
Human rights groups say when police tried to arrest him, he ran away - and was then shot in the back of the head.
Police say he was armed and fought back.
"When he aimed at one of the officers' with a weapon, only then he was shot by the police," Papua police spokesman Yohanes Nugroho said.
"We suspect that he was behind the string of violence in Papua since March."
Several people were killed during those protests, including a German national.
Papua is one of the least developed parts of Indonesia but it has a wealth of resources.
It became a part of the archipelago in a controversial election in 1969 that many Papuans say was a sham.
A small group of rebels have waged an independence struggle in the province for decades, but analysts say the calls for independence have been getting louder and more widespread in recent months.
Source: BBC News
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