A gunman opened fire in Oslo's night-life district early Saturday, killing two people and leaving 10 seriously wounded in what police are investigating as a possible terrorist attack during the Norwegian capital's annual Pride festival.

Investigators said the suspect, identified as a 42-year-old Norwegian citizen originally from Iran, was arrested after opening fire at three locations in downtown Oslo.

While the motive was unclear, organisers of Oslo Pride cancelled a parade that was set for Saturday as the highlight of a weeklong festival. One of the shootings happened outside the London Pub, a bar popular with the city's LGBTQ community, just hours before the parade was set to begin.

Police attorney Christian Hatlo said the suspect was being held on suspicion of murder, attempted murder and terrorism, based on the number of people targeted at multiple locations.

Our overall assessment is that there are grounds to believe that he wanted to cause grave fear in the population, Hatlo said.

Hatlo said the suspect's mental health was also being investigated.

We need to go through his medical history, if he has any. It's not something that we're aware of now," he said.

The shootings happened around 1 a.m. local time, sending panicked revelers fleeing into the streets or trying to hide from the gunman.

Olav Roenneberg, a journalist from Norwegian public broadcaster NRK, said he witnessed the shooting.

I saw a man arrive at the site with a bag. He picked up a weapon and started shooting, Roenneberg told NRK. First I thought it was an air gun. Then the glass of the bar next door was shattered and I understood I had to run for cover.

Police inspector Tore Soldal said two of the shooting victims died and 10 people were being treated for serious injuries, but none of them was believed to be life-threatening.

Prime Minister Jonas Gahr Stoere said in a Facebook post that the shooting outside London Pub in Oslo tonight was a cruel and deeply shocking attack on innocent people."

He said that while the motive was unclear, the shooting had caused fear and grief in the LGBTQ community.

We all stand by you, Gahr Stoere wrote.

Christian Bredeli, who was at the bar, told Norwegian newspaper VG that he hid on the fourth floor with a group of about 10 people until he was told it was safe to come out.

Many were fearing for their lives, he said. On our way out we saw several injured people, so we understood that something serious had happened."

Norwegian broadcaster TV2 showed footage of people running down Oslo streets in panic as shots rang out in the background.

Investigators said the suspect was known to police, as well as to Norway's security police, but not for any major violent crimes. His criminal record included a narcotics offense and a weapons offense for carrying a knife, Hatlo said.

Hatlo said police seized two weapons after the attack: a handgun and an automatic weapon, both of which he described as not modern without giving details.

He said the suspect had not made any statement to the police and was in contact with a defense lawyer.

Hatlo said it was too early to say whether the gunman specifically targeted members of the LGBTQ community.

We have to look closer at that, we don't know yet, he said.

Still, police advised organizers of the Pride festival to cancel the parade Saturday.

Oslo Pride therefore urges everyone who planned to participate or watch the parade to not show up. All events in connection with Oslo Prides are canceled, organisers said on the official Facebook page of the event.

Norway has a relatively low crime rate but has experienced violent attacks by right-wing extremists, including one of the worst mass shootings in Europe in 2011, when a gunman killed 69 people on the island of Utoya after setting off a bomb in Oslo that left eight dead.

In 2019, another right-wing extremist killed his stepsister and then opened fire in a mosque but was overpowered before anyone there was injured.

(AP)