It was discovered along with ammunition during a security alert at an industrial estate on Friday evening.
The weapon is set to undergo full forensic testing.
A gym was evacuated at the Dublin Road site after the items were found on the ground in the Lismourne Place area.
Speaking to the media on Monday, PSNI Superintendent Mark McEwan said the gun was held by dissidents intent on killing.
He continued: “As a result of an investigation into violent dissident republican activity, in particular the New IRA, a policing operation was mounted in Strabane on Friday evening.
“As a result of that we have recovered what we suspect to be an assault rifle – an Armalite-type assault rifle – and ammunition.
“It’s important to say the operation has been a success in terms of removing this weapon from our streets.
“A gun like this is designed for one reason and one reason only and that is to kill people.
“We believe it has been moved into Strabane to mount an attack on police and such an attack would be attempted murder and shows complete disregard for this community – weapons like this, fired in a built-up area, could have a devastating impact.”
Police asked anyone with information to come forward.
SDLP MLA for West Tyrone, Daniel McCrossan, condemned those who were responsible for keeping the weapon.
“This discovery of this weapon is a deeply worrying development,” he said.
“Illegal and irresponsible gun ownership is very dangerous and we have seen weapons of this type used in illegal activity including the attempted murder of police.
“The illegal storing of firearms is unacceptable and it allows those who committed to violence to continue to put the public at risk.
“We must all be vigilant against this threat and I would encourage anyone with any relevant information to contact the police immediately.”