One man was injured by the hatchet.
That man and two other people also needed treatment after being "blasted with pepper spray" by the attacker, said Nashville police spokesman Don Aaron.
Nashville police identified the suspected attacker as Vincente David Montano, 29.
Police earlier believed the attacker was 51.
While authorities had initially described Montano as a gunman and said he had a firearm, the police said it turned out he had an airsoft pistol - a replica that can shoot pellets or BBs - rather than a real gun.
Police were called to the scene for reports of "an active shooter" inside the Carmike Hickory 8 movie theatre in Antioch, southeast of downtown Nashville, Aaron said.
"We believe the imminent threat has been ended," Aaron said.
Aaron said that a man with a surgical mask over his face and a backpack on his chest filled a theatre with pepper spray.
The person entered the projection room during a screening of Mad Max: Fury Road then went into the theatre, Aaron said. One of the officers who first responded went into the theatre and encountered the gunman, who "raised his weapon toward that officer and pulled the trigger".
The officer fired at the attacker and backed away from the theatre.
When the Swat team arrived, the air inside the theatre was so thick with pepper spray that the officers had to get gas masks before trying to engage with the hatchet-wielding man.
The man identified later as Montano emerged from the back of the theatre and was then shot and killed.
The man had two bags with him, and authorities checked the bags to make sure there was no additional danger. An hour after the active shooter situation was deemed over, one of the bags was detonated by a bomb squad to "render it safe".
Agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives responded to the theatre emergency and were examining the area.
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