Marc Alexander Ringland, 29, was armed with a knife when he was shot in the chest by the unnamed PSNI officer at a petrol station on the Albertbridge Road in east Belfast last February.
The father-of-one died in hospital.
On Tuesday, the officer told the inquest: "I felt he was going to stab me. He was only two metres from me. He knew what was going to happen."
Named only as Officer A and giving evidence from behind a screen, he added that he also believed the lives of staff and customers were at risk.
"I was concerned for their lives. I believed an armed man was in the shop. I believed someone could have been injured," he said.
The jury of eight men and two women held that he had reasonable grounds to shoot and that he had properly identified himself and issued a loud, clear and assertive warning before firing one round.
The officer, who has four years experience with the PSNI and who had completed firearms training in December 2010, confirmed eye witnesses' reports that he had shouted a warning before firing.
He told the court that before he discharged one round, he shouted: "Armed police - drop the knife or I will shoot."
A lawyer for the PSNI told the inquest that officers are trained to incapacitate an offender as quickly as possible by targeting a central mass, rather than limbs.
The Ringland family, through their solicitor Denis Moloney, said they hoped that the message that "knife culture kills" would get through to others.
"They hope no one else goes through the grief that they have endured over the past two years," Mr Moloney added.
They would hope that the lessons that they have learned would be learned by the wider community ... Knives are as lethal as guns.
Denis Moloney, Ringland family solicitor
The court was further told that Marc Ringland's mother Janet died just days after the shooting. Her family have attributed her death to the shock of what happened to her son.
Coroner John Leckey extended sympathies to the relatives.
"It is very sad for the family that he died in the circumstances in which he did. I am sure seeing the CCTV footage made them relive the terrible experience," he said.
The footage had again been shown to the jury on Tuesday, with members of the Ringland family - who watched the recording on the previous day - leaving the courtroom.
The family's solicitor said it had been "gruesome", but that they were grateful to have seen the footage as it "clarified for them the actual facts of the tragedy in which their son died".
The CCTV images showed Marc Ringland, whose 133 previous convictions included robbery, flash a knife at a shop assistant before helping himself to £215 in cash.
After the shooting, Officer A and a member of the public administered immediate first aid but, according to the assistant state pathologist, it was unlikely anything could have saved Marc Ringland.
"Even if a chest surgeon was there and a full operating table was in the garage, it was still bleak," Dr James Lyness told the inquest.
The jury had heard that Marc Ringland was a man who struggled with alcohol and drugs. He had been three times over the legal drink-drive limit at the time of his death.
There were also traces of cannabis and Temazepam in his system.
The officer was not prosecuted as the Police Ombudsman's Office found that no official guidelines had been breached and the Public Prosecution Service decided that there was no case to answer.