Armed with machine guns, officers will drill their training techniques during the exercise at the Trafford Centre complex in Manchester.
Around 800 people will be involved in the role-play exercise, with police wanting to make the “attack” as realistic as possible.
Senior officers, who will direct different scenarios such as possible hostage taking, mass casualties or suicide bombers.
Police from from the North West Counter Terrorism Unit stress there is no specific threat to the shopping centre.
But the current UK terror threat level is described as severe – meaning an attack is highly likely.
The sick Islamic State group, which was behind the Paris and Brussels attacks, has repeatedly warned it is primed to attack Britain.
Rebekah Sutcliffe of Greater Manchester Police said: “Our priority is to stop terrorists from planning and orchestrating attacks.
“And with exercises like this, we can test our response in a safe environment, so we are fully prepared for a time when it may be critical.
“It is an opportunity for us to make sure we are in the best position possible, should a terrorist attack happen in the North West.”
Richard Paxton, General Manager of the Trafford Centre, said: “The police and emergency services do an extremely important job keeping the public safe.
“This training, planning and preparation to deal with all eventualities is essential and we had no hesitation allowing them to use our facilities for their exercise.”