Agents obtained information that the kidnapping victim was at the Lakeview Apartments in Leonia and executed a search warrant at 4 a.m.
Terrified residents heard gun blasts and commands given to the suspect to surrender.
The suspect was shot during the confrontation in a corner apartment, and it is believed he was armed at the time of the shooting.
The kidnapping victim was rescued and was not injured. No agents or officers were hurt during the incident.
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The incident started in Northeast Philadelphia when a man contacted authorities to report his 17-year-old son had been kidnapped.
That man was getting calls to pay a ransom, and it became a joint investigation involving the Philadelphia office of the FBI working with the office in Newark.
It turned into a long stakeout at the garden-style apartment, which ended in the deadly encounter.
The identity of the deceased suspect has not yet been released, but he is believed to be an older teenager.
"The FBI Newark and Philadelphia Field Offices were involved in a kidnapping investigation in the area of Leonia, NJ," the FBI said in a statement. "During the course of the confrontation with subjects, one subject was shot and is deceased. The victim was safely recovered. There are no threats to the community."
In a later statement, they said "all available resources were deployed in an effort to secure his safe return."
The area remained on lockdown into the afternoon.
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