Officials told French media that weapons, including a Kalashnikov rifle and handguns, as well as "gas canisters" were found in the vehicle.
Interior Minister Gerard Collomb called it an "attempted attack" and said it "shows once again that the threat level in France is extremely high".
The Paris prosecutor's office has opened an anti-terror investigation into the incident, an Interior Ministry spokesman said.
- In April, a man shot at police officers - also on the Champs-Elysees - killing one officer and wounding two others.
The incident came just two months after a policeman was shot and killed on the avenue, days before the first round of France's presidential election.
The suspect is wearing a white shirt and dark shorts and prone on his stomach on the avenue.
Victoria Boucher and daughter Chrystel said they're hoping the Champs-Elysees reopens soon.
Since the large-scale Paris attacks in November 2015 and last year's Nice truck attack, France has seen a string of smaller assaults targeting security forces.
"Nobody can be happy, and certainly not me, that someone who has been flagged to security agencies can continue to benefit from such an authorization", said Prime Minister Edouard Philippe.
The man, who was known to French security services, died in the incident, officials said.
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"The show must go on", the daughter said in English.
Questions arose on Tuesday over how a known radical Islamist who rammed a vehicle laden with weapons and gas canisters into a police van on Paris's Champs-Elysees was able to hold a firearms licence.
"You could tell when you saw them in the street that they were very religious", he said.
"By God's grace, we were able to protect him from harm", Mahmoud said.
Hours later, access to the avenue remained blocked, while bomb squads combed the area.
A senior police officer and his female companion were both killed by a radicalised man at their home in the Paris suburbs a year ago.
The police department tweeted the warning Monday without providing further details.
As informs Agency Reuters, the police cordoned off the area around the théâtre Marigny and recommended that the capital's residents and tourists not to approach the Champs-élysées.
Authorities discovered a gas tank and an AK-47 rife in the attacker's auto, Fox News confirmed.
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