It said officers were using Round Irritant Personnel (Rip) rounds, which are designed to stop vehicles containing armed criminals.
The rounds are cartridges which when fired, release a blast of gas at high pressure.
The IPCC has said that in this instance the cartridges were filled with a harmless white powder rather than CS gas.
It is believed the training exercises involve officers blasting the rounds into suspects' cars to disable the occupants.
Other officers practise driving alongside to shoot out the tyres.
The IPCC said that the training technique and its use by Greater Manchester Police and any other forces would form part of the investigation.
Pc Terry joined the force in 1997 and had been a firearms officer for six years.
Acting Chief Constable of Greater Manchester Police (GMP) Dave Whatton said: "Everybody in Greater Manchester Police is devastated by the news that we have all received and the loss of a highly regarded colleague and friend."
Naseem Malik, IPCC commissioner for the North West, said: "My sympathies go out to the family and friends of the man who died.
Acting Chief Constable Dave Whatton says police are 'devastated' by the death
"This must have been a very traumatic experience also for all the officers involved in the exercise."
The area where the incident happened is the site of a disused former electronics factory, known locally as the Sharp building.
It was the former distribution centre for Sharp, the electronics giant, which used to sponsor Manchester United.
The focus of the forensic investigation at the former factory was on four cars taped off from the rest of the goods yard.
One of the cars, a grey Citroen Xsara, had its front passenger window smashed, with glass on the ground below it.
The driver's door was open as was the driver's door of the Suzuki Vitara car parked in front.
A bullet-proof jacket, oxygen mask, police helmets and a yellow jacket were on the ground nearby.
Five UK police officers have been shot and killed accidentally with police firearms.
The last officer shot and killed by accident during a training exercise was Special Constable Arthur Guest, who was shot by an instructor in 1941.
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