Police encounter took place in Baghdadi, gang war member arrested in injured condition, said SSP City Sarfraz Nawaz.
Arrested accused identified as Kabir alias Dada had demanded extortion of Rs 500,000/- two days ago.
The accused was arrested in injured condition after an exchange of firing with police late Sunday night.
The accused belong to Lyari gang war Wasi Lakho group and is involved in serious crimes including murder, attempt to murder, extortion, etc.
He wanted to activate gang war in Old City area.
A pistol and a mobile phone were recovered from his possession.
Further investigation is underway.