Polk County Sheriff Grady Judd identified the dead deputy as Vernon Matthew "Matt" Williams, 39. The deputy who made the initial traffic stop, Douglas Speirs, also 39, was shot in the leg and will survive, Judd said. Williams' police dog, Diogi, also was fatally shot.
Williams and Diogi have been a K-9 team at the agency since 2000, reports CBS affiliate WTSP-TV in Tampa, Fla.
Armed officers carrying shields, dozens of patrol cars and helicopters searched for the suspect after the shooting just before noon in north Lakeland. Several area schools were locked down. Judd said there was "a chance" that they had identified the suspect, but he would not elaborate.
Speirs first approached the suspect during the traffic stop, but he fled into a wooded area when the officer began asking him about his identity, Judd said. Speirs and Williams, who arrived a short time later with his German shepherd, followed the suspect into the woods.
As the officers tracked him, there was a "burst of gunfire," Judd said. Speirs returned fire and he and Williams were shot in the gunfight.
The suspect later exchanged gunfire with other officers who tracked him to a shed in the woods, but no one was hit.
"We will find this suspect, we will bring him to justice," a visibly shaken Judd said during a news conference. "The investigation will go on. We will not sleep. We will not rest until we have the suspect in custody for this heinous action today."
Williams had been with the sheriff's office since April 1994. He leaves behind a wife and three children. Speirs, a six-year veteran deputy, is married with two sons. Judd called Williams "a fine man," and "a dedicated deputy."
Authorities cordoned off a large area around the gunman's car. Helicopters circled in wide arcs as emergency vehicles raced up and down local roads.
Officers arrived en masse from neighboring counties to assist in the search. Traffic backed up on nearby Interstate 4, which runs near the city about 35 miles east of Tampa.
Judd said 10,000 to 15,000 people live in the area, which is around 3 square miles. Officers were going house to house in some areas. A mass evacuation was not practical so deputies asked people to lock themselves inside.
The shooting occurred near Kathleen High School, which was locked down, officials said. Two others schools farther away from the scene also were locked down for a time.
The 1,600 students at Kathleen High will remain on campus until officials approve their release, school district officials said.