Two loud shots were heard at a pharmacy in central Karlsruhe, where police say several people are being held hostage.
Shortly before, several police officers ran towards the pharmacy, eyewitnesses said. It was initially unclear whether the police had raided the pharmacy.
Several people were being held hostage in the pharmacy, according to police, who closed off nearby streets in a large-scale operation.
The police were first notified of the situation by emergency calls that arrived at around 4.30pm (3.30pm GMT).
It is unclear how many perpetrators are involved.
A police spokesman earlier said it could not provide information on this or “possible requests and ransom demands for tactical reasons”.