(AFP) Police today shot dead an apparently mentally unstable man who held 12 people hostage at gunpoint in a five-hour drama in Sabah.

All 12 hostages, including a baby girl, were freed unharmed after police opened fire and killed Amin Kandaung when negotiations with him failed, district police chief Khalid Merican told AFP .

Khalid said the unemployed man, armed with a homemade shotgun and a dagger, forced the 12 hostages, all of whom were from his village,into a van just after dawn.

Amin told one of the hostages to drive to the nearby town of Tamparuli, about 30 kilometres Kota Kinabalu.

The van was stopped about two hours later when police blocked the vehicle.

Loner

After about three hours of negotiations, police were forced to open fire when Amin threatened to kill the hostages and was about to stab one of them, said Khalid, who led the negotiations.

"He was killed on the spot. He was not holding them for ransom but during negotiations, he said he has been humiliated by the villagers who were making fun of him," the police chief said.

Khalid said Amin, who was married with seven children, was believed to be mentally unstable as he had previously issued death threats to residents in his village.

Villagers described Amin as a "loner" and had been living in fear of him, he added. Investigations were continuing.